Farm Credit of Central FLorida Annual Report 2021 by Farm Credit of Central Florida

Committed to Our Mission Annual Report

2021

FARM CREDIT OF CENTRAL FLORIDA 2021 Annual Report

2021 Annual Report FARM CREDIT OF CENTRAL FLORIDA

Comited TO OUR MISSION PRESIDENT’S MESSAGE After a very tumultuous 2020, caused by the impacts of a global pandemic, most folks were feeling more optimistic about 2021 as businesses reopened, travel restrictions were reduced, and vaccines and other treatment options were becoming a reality. But as is often the case, and especially in agriculture, things do not always go as planned, and impacts from a global pandemic continued to manifest themselves, primarily in the form of supply chain issues. Previous and ongoing shutdowns began to impact the availability of everything from essential inputs to fnished products. While refecting on the issues that impacted us all in 2021, I thought about the Federal Farm Loan Act that created the Farm Credit system in 1916. The Act was born out of a desire to ensure that America’s farmers had access to a reliable source of credit at reasonable interest rates and terms. You see, before the Act was passed many farmers across the country had a diferent type of supply chain constraint, “access to reliable credit.”

iv. 97% Customer Satisfaction while experiencing loan growth of 34%. Increased workforce by 15% to ensure we maintain and enhance the member experience and deliver quality service. v.

Continued to invest in our technology to ensure that we are positioned to meet member needs well into the future.

At Farm Credit of Central Florida, we are blessed to have an incredibly diverse farming region. In 2021, we began a series called Real Farms, Real Stories, where we attempt to bring to life members stories from across Central Florida. Several of those stories are highlighted on the following pages. I hope you’ll take the time to learn a little more about the diferent industries and families highlighted and how the Commitment to Our Mission has helped their operations.

This Commitment to Our Mission is seen in the results achieved since the start of the pandemic:

2021 reinforced the importance of having strong relationships with people that understand your operation and will be there when you need them. For more than 105 years, Farm Credit has served agriculture and rural communities. At Farm Credit of Central Florida our dedicated and engaged staf remain as Committed to Our Mission today as we have ever been. That commitment is one of the reasons I believe that the future for Central Florida agriculture and its rural communities remains bright.

Sincerely,

At Farm Credit of Central Florida we take those founding principles seriously and remain Committed to Our Mission: “To be the premier partner with farmers and rural communities throughout all of Central Florida by providing reliable, consistent credit and fnancial services.”

Originated Loans have increased by $216 million, which is a 34% increase.

ii. Cash patronage payments to members totaling $21.1MM. iii. Participated in the Paycheck Protection Program for the member’s beneft. Successfully closed $31 million in loans; impacting nearly 6,000 jobs across Central Florida.

REGGIE HOLT

Chief Executive Officer

FARM CREDIT OF CENTRAL FLORIDA 2021 Annual Report

Reginald T. Holt Chief Executive Ofcer

OUR MISSION

To be the premier partner with farmers and rural communities throughout all of Central Florida by providing reliable, consistent credit and fnancial services. 1,203

$902

127

$1,077 $919

790

$ 689

$960 $562

$563

$119

$590

$103

$109

97.8% 97.7%

$113

98.6%

99.5% 99.1%

2017 2018 2019 2020 2021

SERVICING LOAN VOLUME

TOTAL ASSETS

MEMBER EQUITY

CREDIT QUALITY

21.2

13.7

$ 16.1

$12.3

$14.2

$11.2

$ 12.3 $7.8

$8.5

$9.7

$11.6

3.1%

$9.5

2.6%

2.6% $ 6.2

2.4% 2.2%

$ 6.5

$ 4.6

2017 2018 2019 2020 2021

NET INCOME

CORE INCOME FROM OPERATIONS

ROA

CASH PATRONAGE REFUNDS

*Dollar amounts in millions

2021 Annual Report FARM CREDIT OF CENTRAL FLORIDA

BOARD OF DIRECTORS

Our board of directors is dedicated to ensuring your prosperity by always keeping your interests in mind.

KEITH D. MIXON

RANDY L. LARSON

DANIEL T. APRILE

JENNY R. BLACK

C. DENNIS CARLTON, SR.

REED C. FISCHBACH

W. REX CLONTS JR.

WILLIAM L. KLINGER

DAVID A. MERENESS

Chairman

Vice Chairman

RANDALL E. STRODE

FARM CREDIT OF CENTRAL FLORIDA 2021 Annual Report

PEOPLE WHO WORK FOR YOU

Our strong team of leaders makes supporting you, the agriculture industry and its stakeholders our number-one priority.

REGGIE HOLT

SCOTT FONTENOT

Chief Executive Ofcer

Chief Operating Ofcer

JEFF PHILLIPS

ANNIE SULLIVAN

Chief Lending Ofcer

Chief Financial Ofcer

DAWN TUTEN

Chief Administrative Ofcer

JOHAN DAM

Chief Marketing / Chief Risk Ofcer

KERRI KILBY

Chief Credit Ofcer

2021 Annual Report FARM CREDIT OF CENTRAL FLORIDA

CONNECTING WITH OUR MEMBERS

At Farm Credit of Central Florida our mission to serve agriculture and rural communities across Central Florida is at the heart of everything we do. We believe that we have some of the best agriculturalist in the country living and working right here in our back yard, each with their own unique product, backgrounds, experiences, family history and challenges to overcome. With less than 2% of the population now directly connected to the farm, Farm Credit of Central Florida set out to work with our members to tell their stories and help show the world the farms, and the people behind them, that provide the food, fbers and horticultural products that we often take for granted, but use every day. The video series has been dubbed Real Farms, Real Stories and has been a hit with members, employees and the community at large. Since Real Farms, Real Stories inception, we have featured 10 farm stories that have highlighted the diversity of agriculture within Central Florida and allowed both staf and the community at large a glimpse into an operation that they may otherwise never get to experience.

As we enter 2022 we look forward to continuing to feature members in the Real Farms, Real Stories videos so they can continue to tell the story of agriculture and rural communities across Central Florida. If you have an interest or would be willing to be featured in a Real Farms, Real Stories video, please contact your loan ofcer. Connect with us on social & YouTube to watch the Real Farms, Real Stories video series. (Social Media Icons – Facebook, Twitter, LinkedIn, Instagram, YouTube) To watch one of the Real Farms, Real Stories videos scan the QR Code next to the video you would like to watch, or scan this QR Code to visit our YouTube channel to see all of the Real Farms, Real Stories available.

REAL FARMS REAL STORIES SOCIAL MEDIA TOTALS

(j@ ENGAGEMENTS

16,456

James McComas, Florico Foilage

Bisser Georgiev, Live Trends

FARM CREDIT OF CENTRAL FLORIDA 2021 Annual Report

m, rl

IMPRESSIONS

106,260

.......... -~ , ............. m . . . . . . . . . . II TY STRODE Agri-Starts Orange County

■

.................. ~·.

. ..

···················· fM

'. .......................... JOHN THOMAS & WIFE

JIM MILGARD Continential Floral Volusia County

Cattle Citrus County

MICKEY FAGAN M&D Gator Pasco County

....................

MATT & JULIE ROTH

The Magnolia Company

Volusia County

. . VOLUSIA

CITRUS

ORANGE PASCO POLK

TOM THAYER Citrus Grower Polk County

II ~

DAVID WEBB Webbs Honey Orange County

.......

·························••· WAYNE & MAX MERCER

JOHN ALBERS Amerigo Farms Orange County

Mercer Botanicals Orange County

JAMES MCCOMAS Florico Foliage Orange County

2021 Annual Report FARM CREDIT OF CENTRAL FLORIDA

·-

FARM CREDIT OF CENTRAL FLORIDA BY THE NUMBERS $573,664

1,447

AVERAGE LOAN COMMITMENT AMOUNT

BORROWER COUNT

460 NEW MEMBER

99%

70%

CSAT STATS 2021 CUSTOMER SATISFACTION

OF LOANS HAVE A FIXED RATE

BORROWERS IN 2021

4.9/5

ON OVERALL CUSTOMER SATISFACTION

97%

OF RESPONDENTS WERE SATISFIED

AS OF 12/31/2021 CENTRAL FLORIDA TOP # 5 COMMODITIES FINANCED ARE:

2. Fruit / Veg

3. Cattle

4. Nursery

5. Citrus

31.93%

Total Servicing Volume as of 12/31/2021

Millions $400 $350

$T t lS

FARM CREDIT OF CENTRAL FLORIDA 2021 Annual Report

i i

5.44%

3.53%

1.52%

1.42%

1.17%

0.89%

0.57%

$50

0.46%

$100

0.21%

$150

3.22%

$200

12.45%

$250

11.04%

$300

26.15%

1. Strawberries

Farm Credit of Central Florida is committed to the future of agriculture by supporting young, beginning and small farmers. YBS includes farmers who are 35 or younger (“young”), have been farming for 10 years or less (“beginning”) and whose gross annual farm sales are less than $250,000 (“small”). in 2021, Farm Credit of Central Florida increased their overall lending to YBS Farmers both in terms of number of new loans and total volume. The largest increases were in total loan volumes.

YBS =

Young Beginning Small

2021

increased

overall lending

to ybs

New Loans in 2021

,. Young = 35

young beginning small

or younger

beginning =

years or less

68 202 350

total Loans 167 513 936

net Volume Closed less than

small = 250k

gross annual sales

young beginning small

$ 9,288,898 $ 44,368,164 $ 44,458,653

2021 Annual Report FARM CREDIT OF CENTRAL FLORIDA

Farm Credit of Central Florida, ACA

FARM CREDIT OF CENTRAL FLORIDA, ACA

2021 ANNUAL REPORT Contents Report of Management ........................................................................................................................................... 2 Report on Internal Control Over Financial Reporting ........................................................................................... 3 Five-Year Summary of Selected Financial Data .................................................................................................... 4 Management’s Discussion & Analysis of Financial Condition & Results of Operations............................... 5-19 Disclosure Required by FCA Regulations ..................................................................................................... 20-25 Report of the Audit Committee ............................................................................................................................26 Report of Independent Auditors ..................................................................................................................... 27-28 Financial Statements ....................................................................................................................................... 29-32 Notes to Financial Statements......................................................................................................................... 33-57

1 2021 Annual Report

Farm Credit of Central Florida, ACA

Report of Management The Consolidated Financial Statements have been audited by Independent Auditors, whose report appears elsewhere in this annual report. The Association is also subject to examination by the Farm Credit Administration.

The accompanying Consolidated Financial Statements and related financial information appearing throughout this annual report have been prepared by management of Farm Credit of Central Florida, ACA (Association) in accordance with generally accepted accounting principles appropriate in the circumstances. Amounts which must be based on estimates represent the best estimates and judgments of management. Management is responsible for the integrity, objectivity, consistency, and fair presentation of the consolidated financial statements and financial information contained in this report.

The Consolidated Financial Statements, in the opinion of management, fairly present the financial condition of the Association. The undersigned certify that we have reviewed the 2021 Annual Report of Farm Credit of Central Florida, ACA, that the report has been prepared under the oversight of the audit committee of the Board of Directors and in accordance with all applicable statutory or regulatory requirements, and that the information contained herein is true, accurate, and complete to the best of our knowledge and belief.

Management maintains and depends upon an internal accounting control system designed to provide reasonable assurance that transactions are properly authorized and recorded, that the financial records are reliable as the basis for the preparation of all financial statements, and that the assets of the Association are safeguarded. The design and implementation of all systems of internal control are based on judgments required to evaluate the costs of controls in relation to the expected benefits and to determine the appropriate balance between these costs and benefits. The Association maintains an internal audit program to monitor compliance with the systems of internal accounting control. Audits of the accounting records, accounting systems and internal controls are performed and internal audit reports, including appropriate recommendations for improvement, are submitted to the Board of Directors.

David A. Mereness Chairman of the Audit Committee

Reginald T. Holt Chief Executive Officer

Anne M. Sullivan Chief Financial Officer

March 10, 2022

2 2021 Annual Report

Farm Credit of Central Florida, ACA

Report on Internal Control Over Financial Reporting The Association’s management has completed an assessment of the effectiveness of internal control over financial reporting as of December 31, 2021. In making the assessment, management used the framework in Internal Control — Integrated Framework (2013), promulgated by the Committee of Sponsoring Organizations of the Treadway Commission, commonly referred to as the “COSO” criteria.

The Association’s principal executives and principal financial officers, or persons performing similar functions, are responsible for establishing and maintaining adequate internal control over financial reporting for the Association’s Consolidated Financial Statements. For purposes of this report, “internal control over financial reporting” is defined as a process designed by, or under the supervision of the Association’s principal executives and principal financial officers, or persons performing similar functions, and effected by its Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting information and the preparation of the Consolidated Financial Statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Association, (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial information in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures are being made only in accordance with authorizations of management and directors of the Association, and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Association’s assets that could have a material effect on its Consolidated Financial Statements.

Based on the assessment performed, the Association’s management concluded that as of December 31, 2021, the internal control over financial reporting was effective based upon the COSO criteria. Additionally, based on this assessment, the Association determined that there were no material weaknesses in the internal control over financial reporting as of December 31, 2021.

Reginald T. Holt Chief Executive Officer

Anne M. Sullivan Chief Financial Officer

March 10, 2022

3 2021 Annual Report

Farm Credit Of Central Florida, ACA

Consolidated Five - Year Summary of Selected Financial Data (dollars in thousands) Balance Sheet Data Cash Investments in debt securities Loans Allowance for loan losses Net loans Equity investments in other Farm Credit institutions Other property owned Other assets Total assets Notes payable to AgFirst Farm Credit Bank* Accrued interest payable and other liabilities with maturities of less than one year Total liabilities Capital stock and participation certificates Retained earnings Allocated Unallocated Accumulated other comprehensive income (loss) Total members' equity Total liabilities and members' equity Statement of Income Data Net interest income Provision for (reversal of allowance for) loan losses Noninterest income (expense), net Net income Key Financial Ratios Rate of return on average: Total assets Total members' equity Net interest income as a percentage of average earning assets Net (chargeoffs) recoveries to average loans Total members' equity to total assets Debt to members' equity (:1) Allowance for loan losses to loans Permanent capital ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total regulatory capital ratio Tier 1 leverage ratio Unallocated retained earnings (URE) and URE equivalents leverage ratio Net Income Distribution Estimated patronage refunds: Cash

2021

2020

December 31, 2019

2018

2017

11 2,748 757,407 (3,067) 754,340 6,755 — 26,285 $ 790,139

12 3,966 658,098 (3,283) 654,815 6,636 227 23,669 $ 689,325

14 5,262 568,435 (3,113) 565,322 6,677 — 13,149 $ 590,424

189 7,913 538,999 (3,270) 535,729 6,568 — 12,949 $ 563,348

53 13,029 533,519 (4,185) 529,334 6,318 — 13,080 $ 561,814

$ 635,922

$ 548,714

$ 463,711

$ 442,646

$ 443,696

26,909

21,918

13,266

11,602

15,379

662,831 1,149

570,632 1,008

476,977 942

454,248 882

459,075 900

19,103 107,687 (631) 127,308 $ 790,139

20,380 98,129 (824) 118,693 $ 689,325

21,637 91,532 (664) 113,447 $ 590,424

22,907 85,772 (461) 109,100 $ 563,348

24,588 77,821 (570) 102,739 $ 561,814

16,356 (340) 4,462 21,158

15,332 214 979 16,097

14,737 (424) (2,878) 12,283

13,983 (1,775) (1,607) 14,151

12,259 (678) (682) 12,255

3.05% 16.92%

2.59% 13.56%

2.23% 10.78%

2.62% 13.19%

2.39% 12.24%

2.43% 0.018% 16.11% 5.21 0.40% 16.81% 16.74% 16.74% 17.17% 16.32%

2.54% (0.007)% 17.22% 4.81 0.50% 17.97% 17.87% 17.87% 18.40% 17.41%

2.74% 0.050% 19.21% 4.20 0.55% 20.13% 20.04% 20.04% 20.48% 19.49%

2.63% 0.165% 19.37% 4.16 0.61% 20.03% 19.91% 19.91% 20.54% 19.00%

2.44% 0.020% 18.29% 4.47 0.78% 18.75% 18.58% 18.58% 19.50% 17.80%

14.34%

15.00%

16.48%

15.61%

14.02%

11,600

9,500

* General financing agreement is renewable on a one-year cycle. The next renewal date is December 31, 2022.

4 2021 Annual Report

6,500

6,200

4,600

Farm Credit of Central Florida, ACA

Management’s Discussion & Analysis of Financial Condition & Results of Operations (dollars in thousands, except as noted) electronic version of the Annual Report, which is available on the website, within 75 days after the end of the fiscal year and distributes the Annual Reports to shareholders within 90 days after the end of the fiscal year. The Association prepares an electronic version of the Quarterly report, which is available on the website, within 40 days after the end of each fiscal quarter, except that no report needs to be prepared for the fiscal quarter that coincides with the end of the fiscal year of the Association.

GENERAL OVERVIEW The following commentary summarizes the financial condition and results of operations of Farm Credit of Central Florida, ACA, (Association) for the year ended December 31, 2021 with comparisons to the years ended December 31, 2020 and December 31, 2019. This information should be read in conjunction with the Consolidated Financial Statements, Notes to the Consolidated Financial Statements and other sections in this Annual Report. The accompanying consolidated financial statements were prepared under the oversight of the Audit Committee of the Board of Directors. For a list of the Audit Committee members, refer to the “Report of the Audit Committee” reflected in this Annual Report. Information in any part of this Annual Report may be incorporated by reference in answer or partial answer to any other item of the Annual Report.

FORWARD LOOKING INFORMATION This annual information statement contains forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Words such as “anticipates,” “believes,” “could,” “estimates,” “may,” “should,” “will”, or other variations of these terms are intended to identify the forward-looking statements. These statements are based on assumptions and analyses made in light of experience and other historical trends, current conditions, and expected future developments. However, actual results and developments may differ materially from our expectations and predictions due to a number of risks and uncertainties, many of which are beyond our control. These risks and uncertainties include, but are not limited to:

The Association is an institution of the Farm Credit System (System), which was created by Congress in 1916 and has served agricultural producers for over 100 years. The System’s mission is to maintain and improve the income and well-being of American farmers, ranchers, and producers or harvesters of aquatic products and farm-related businesses. The System is the largest agricultural lending organization in the United States. The System is regulated by the Farm Credit Administration, (FCA), which is an independent safety and soundness regulator.

• political, legal, regulatory and economic conditions and developments in the United States and abroad; • economic fluctuations in the agricultural, rural utility, international, and farm-related business sectors; • weather-related, disease, and other adverse climatic or biological conditions that periodically occur that impact agricultural productivity and income; • changes in United States government support of the agricultural industry and the Farm Credit System, as a government-sponsored enterprise, as well as investor and rating-agency reactions to events involving other government-sponsored enterprises and other financial institutions; and • actions taken by the Federal Reserve System in implementing monetary policy.

The Association is a cooperative, which is owned by the members (also referred to throughout this Annual Report as stockholders or shareholders) served. The territory of the Association extends across a diverse agricultural region of central Florida. Refer to Note 1, Organization and Operations, of the Notes to the Consolidated Financial Statements for counties in the Association’s territory. The Association provides credit to farmers, ranchers, rural residents, and agribusinesses. Our success begins with our extensive agricultural experience and knowledge of the market. The Association obtains funding from AgFirst Farm Credit Bank (AgFirst or Bank). The Association is materially affected and shareholder investment in the Association could be affected by the financial condition and results of operations of the Bank. Copies of the Bank’s Annual and Quarterly Reports are on the AgFirst website, www.agfirst.com, or may be obtained at no charge by calling 1-800-845-1745, extension 2832, or writing Susanne Caughman, AgFirst Farm Credit Bank, Post Office Box 1499, Columbia, SC 29202.

AGRICULTURAL OUTLOOK Production agriculture is a cyclical business that is heavily influenced by commodity prices, weather, government policies (including, among other things, tax, trade, immigration, crop insurance and periodic aid), interest rates and various other factors that affect supply and demand.

Copies of the Association’s Annual and Quarterly reports are also available upon request free of charge on the Association’s website, www.FarmCreditCFL.com, or by calling 1-800-533-2773, or writing Anne M. Sullivan, Chief Financial Officer, Farm Credit of Central Florida, ACA, Post Office Box 8009, Lakeland, FL 33802-8009. The Association prepares an

The following USDA analysis provides a general understanding of the U.S. agricultural economic outlook. However, this outlook does not take into account all aspects of the Association’s business. References to USDA information in

5 2021 Annual Report

Farm Credit of Central Florida, ACA Expected agricultural commodity prices can influence production decisions of farmers and ranchers on planted/harvested acreage of crops or inventory of livestock and thus, affect the supply of agricultural commodities. Greater area of planted/harvested acreage and increased crop yields for some crops in recent years have contributed to increased supply, which exceeded demand. Also impacting yields are the growing conditions that are sensitive to weather conditions. Although not generally affected by weather, livestock and dairy prices are linked to crop prices as feed is a significant input cost to these producers.

this section refer to the U.S. agricultural market data and are not limited to information/data for the Association. Agricultural production is a major use of land in the United States and the value of farm real estate accounted for 82 percent of the total value of the U.S. farm sector assets for 2021 according to the USDA in its February 4, 2022 forecast. Because real estate is such a significant component of the balance sheet of U.S. farms, the value of farm real estate is a critical measure of the farm sector’s financial performance. Changes in farmland values also affect the financial well-being of agricultural producers because farm real estate serves as the principal source of collateral for farm loans.

Global economic conditions and weather volatility in key agricultural production regions can influence demand for food and agricultural products. Therefore, U.S. exports and imports shift to reflect changes in trade policies, world population and economic growth. Also impacting U.S. agricultural trade are global agricultural and commodity supplies and prices, changes in the value of the U.S. dollar and the government support for agriculture.

The USDA’s most recent forecast projects that farm sector equity, the difference between farm sector assets and debt, will rise 3.0 percent in 2021. Farm real estate value is expected to increase 2.0 percent and non-real estate farm assets are expected to increase 8.1 percent, while farm sector debt is forecast to increase 3.0 percent in 2021. Farm real estate debt as a share of total debt has been rising since 2014 and is expected to account for 66.4 percent of total farm debt in 2021.

The USDA net farm income forecast for 2022 assumes a higher level of crop production to offset lower prices. However, livestock cash receipts are forecasted to increase due to higher prices for most commodities in the livestock and dairy segments.

The USDA is forecasting farm sector solvency ratios to remain relatively unchanged in 2021 at 16.1 percent for the debt-toequity ratio and 13.9 percent for the debt-to-asset ratio, which represents the highest levels since 2002, but well below the peak of 28.5 percent and 22.2 percent in 1985. Working capital (which is defined as cash and cash convertible assets minus liabilities due to creditors within 12 months) is forecasted to increase 13.5 percent in 2021 to $96 billion from $85 billion in 2020. Although working capital increased, it remains far below the peak of $165 billion in 2012.

The following table sets forth the commodity prices per bushel for certain crops, by hundredweight for hogs, milk, and beef cattle, and by pound for broilers and turkeys from December 31, 2018 to December 31, 2021: Commodity Hogs Milk Broilers Turkeys Corn Soybeans Wheat Beef Cattle

The USDA’s most recent forecast estimates net farm income (income after expenses from production in the current year; a broader measure of profits) for 2021 at $119.1 billion, a $23.9 billion increase from 2020 and $29.1 billion above the 10-year average. The forecasted increase in net farm income for 2021, compared with 2020, is primarily due to increases in crop receipts of $37.8 billion to $236.6 billion and animals and animal products of $30.9 billion to $195.9 billion, offset in part by a decrease of $18.6 billion to $27.1 billion in direct government payments and an increase in cash expenses of $31.8 billion to $358.3 billion.

12/31/21 $56.50 $21.80 $0.74 $0.85 $5.47 $12.50 $8.58 $137.00

12/31/20 $49.10 $18.30 $0.44 $0.72 $3.97 $10.60 $5.46 $108.00

12/31/19 $47.30 $20.70 $0.45 $0.62 $3.71 $8.70 $4.64 $118.00

12/31/18 $43.40 $16.60 $0.51 $0.50 $3.54 $8.56 $5.28 $117.00

Geographic and commodity diversification across the Association coupled with existing government safety net programs, ad hoc support programs and additional government disaster aid payment for many borrowers helped to mitigate the impact in this period of challenging agricultural conditions. Although the outlook for agriculture has improved significantly since the second quarter of 2020, COVID-19 infection rates (including potential outbreaks in animal processing plants and new more virulent strains) along with weather (expanding severe or extreme drought), trade, rising input costs, labor issues, government policy and global agricultural product production levels may keep agricultural market volatility elevated for the next year. The Association's financial performance and credit quality are expected to remain sound overall due to strong capital levels and favorable credit quality position at the end of 2021. Off-farm income support for many borrowers also helps to mitigate the impact of periods of less favorable agricultural conditions. However, agricultural borrowers who are more reliant on off-farm income sources may be more adversely impacted by a weakened general economy.

The USDA’s outlook projects net farm income for 2022 to decrease to $113.7 billion, a $5.4 billion or 4.5 percent decrease from 2021, but $23.7 billion above the 10-year average. The forecasted decrease in net farm income for 2022 is primarily due to an expected increase in cash expenses of $18.1 billion and a decrease in direct government payments of $15.5 billion, partially offset by increases in cash receipts for animals and animal products of $17.4 billion and crop receipts of $12.0 billion. Cash expenses for feed and fertilizer-lime-soil conditioner purchases are expected to see the largest dollar increases. Direct government payments are forecasted to decrease due to lower supplemental and ad hoc disaster assistance related to the COVID-19 pandemic, as compared with 2021. The increase in crop receipts reflects increases in soybeans, corn, cotton and wheat receipts, while the increase in animals and animal products receipts reflects growth in milk, cattle/calves, and broilers receipts.

6 2021 Annual Report

Farm Credit of Central Florida, ACA assumptions to value items for which an observable liquid market does not exist. Examples of these items include impaired loans, other property owned, pension and other postretirement benefit obligations, and certain other financial instruments. These valuations require the use of various assumptions, including, among others, discount rates, rates of return on assets, repayment rates, cash flows, default rates, costs of servicing and liquidation values. The use of different assumptions could produce significantly different results, which could have material positive or negative effects on the Association’s results of operations.

CRITICAL ACCOUNTING POLICIES The financial statements are reported in conformity with accounting principles generally accepted in the United States of America. Our significant accounting policies are critical to the understanding of our results of operations and financial position because some accounting policies require us to make complex or subjective judgments and estimates that may affect the value of certain assets or liabilities. We consider these policies critical because management must make judgments about matters that are inherently uncertain. For a complete discussion of significant accounting policies, see Note 2, Summary of Significant Accounting Policies, of the Notes to the Consolidated Financial Statements. The following is a summary of certain critical policies.

REGIONAL ECONOMICS General Economy

• Allowance for loan losses — The allowance for loan losses is maintained at a level considered adequate by management to provide for probable and estimable losses inherent in the loan portfolio. The allowance for loan losses is increased through provisions for loan losses and loan recoveries and is decreased through allowance reversals and loan charge-offs. The allowance for loan losses is determined based on a periodic evaluation of the loan portfolio by management in which numerous factors are considered, including economic and political conditions, loan portfolio composition, credit quality and prior loan loss experience.

Florida’s economy remains among the healthiest of states, with estimated GDP growth of 3.7% year on year for 2021 over 2020, the third highest nationwide. Economic forecasts are overwhelmingly positive for 2022, driven by increased tourism as the state remains open for business and rapidly increasing population. The unemployment rate continues to drop and labor force participation has risen as wages incentivize individuals to return to the workforce. The University of Central Florida’s Institute of Economic Forecasting is projecting the state’s Real Gross State Product will expand at an average annual rate of 2.4%. After contracting by 2.8% in 2020, Real Gross State Product is expected rise by 5.1% in 2021, followed by a 1.4% increase in 2022. Job growth is forecast to remain strong with the biggest increases during 2021-2024 expected in Leisure & Hospitality (8.1%), Professional & Business Services (3.8%), Information (3.7%), Financial Activities (2.8%), and Education & Health Services (2.0%). As the state’s economy rebounds, real personal income growth over 2021-2024 is forecast by UCF economists to average 1.3% annually, dropping in 2022 due to lack of stimulus checks and rising again in 2023.

Significant individual loans are evaluated based on the borrower’s overall financial condition, resources, and payment record, the prospects for support from any financially responsible guarantor, and, if appropriate, the estimated net realizable value of any collateral. The allowance for loan losses encompasses various judgments, evaluations and appraisals with respect to the loans and their underlying security that, by nature, contains elements of uncertainty and imprecision. Changes in the agricultural economy and their borrower repayment capacity will cause these various judgments, evaluations and appraisals to change over time. Accordingly, actual circumstances could vary from the Association’s expectations and predictions of those circumstances.

The November 2021 single-family home report released by Florida Realtors portrays a market that remains scorching hot. Median home sales price was $364,900, a 19.6% increase YoY from 2020, and 34.6% above December 2019. “Months supply of inventory,” a measure of how many homes are available in the pipeline, is down 40% from November 2021, and active listings at the time of the report were down 31.1%. Virtually all aspects of the Florida housing market are tight with no signs of loosening as population growth continues to accelerate. Additionally, the majority of new growth has been occurring along the I-4 corridor, though new builds remain unable to match demand.

Management considers the following factors in determining and supporting the levels of allowance for loan losses: the concentration of lending in agriculture, combined with uncertainties in farmland values, commodity prices, exports, government assistance programs, regional economic effects and weather-related influences. Changes in the factors considered by management in the evaluation of losses in the loan portfolios could result in a change in the allowance for loan losses and could have a direct impact on the provision for loan losses and the results of operations.

As the national economy continues to strengthen, in conjunction with increases in Florida’s population, business creation, nearby wage-growth, and booming tourism industry, the state’s economy is expected to grow at an impressive rate.

 Valuation methodologies — Management applies various valuation methodologies to assets and liabilities that often involve a significant degree of judgment, particularly when liquid markets do not exist for the particular items being valued. Quoted market prices are referred to when estimating fair values for certain assets for which an observable liquid market exists, such as most investment securities. Management utilizes significant estimates and

Agricultural Sectors Within the Florida economy, farming, agribusiness, food processing and manufacturing continue to play a huge role. Agricultural production alone produced nearly $4 billion of GDP in 2020 from $7.45 billion in sales cash receipts.

7 2021 Annual Report

Farm Credit of Central Florida, ACA plants to potted foliage and greenery to woody ornamentals and trees, and everything in-between. While sales growth in the nursery/floriculture sector have ebbed and flowed over the past fifteen years, especially experiencing reductions after the 2008 housing crisis, consumer demand jumped during the pandemic.

The Sunshine State’s unique and diverse climate as well as access to water make it well situated to produce a wide variety of crops. Floriculture ($1.14BN), mostly grown on nurseries and in greenhouses is now the largest single commodity group by cash receipts, followed by oranges ($867MM), sugarcane ($677MM), milk ($486MM), cattle ($477MM), and tomatoes ($463MM). Most crops grown in Florida are not included in USDA support programs and are not materially impacted by changes in Farm Bill legislation.

Trees, woody ornamentals, and sod are generally produced for end-use in the outdoor landscape market and sales are highly sensitive to neighborhood regulations, total new housing starts, and home improvement activity. Over the course of the pandemic, especially in Florida, home building ramped-up, supporting increases in purchases. As the Sunshine State is projected to remain one of the fastest growing states in the country, coupled with the majority of growth being along the I4 corridor, demand from landscape professionals in the woody, tree, and sod sectors is projected to remain strong. Trends on social media sites such as TikTok and Instagram, as well as platforms such as Pinterest and Etsy, have been major instigators of sales in the foliage and greenery sectors. Further, with the percentage of Americans working remotely drastically increasing over the past two years, there has been a renewed interest in gardening and “greening” of interior spaces. This newfound demand for plants has remained strong over the course of the pandemic and recovery. Risks for the industry continue to be labor availability and rising wage costs, supplychain breakdowns, inflation, and expanding development boosting property costs.

While the state’s farm economy continues to expand and overall retains a positive forward outlook, significant issues continue to plague the industry. Rapid population growth and the urban/suburban expansion resulting from it have increased competition for crop land and growing space, leading to rapidly changing agricultural sector demographics. Citrus greening has decimated groves across the state, and growers continue to battle it, with total orange and grapefruit production falling again last year. Weather related risks, water use regulations, environmental rules, land-use and growth management planning, challenges to property rights, supply-chain bottlenecks, inflation, and a tight labor supply are all major issues producers face now and in the near future. Citrus Though it has experienced significant hurdles over the past few years, citrus growing remains an essential aspect of the Florida economy. According to UF/IFAS the total output for the citrus industry in the state was $6.67 billion and it supported nearly 32,500 jobs. Fruit production occurs in 27 of the state’s counties, mostly in the central and south regions. Over the past 20 years the total production acreage has declined almost 50% due to freezes and disease, most impactful of those being citrus greening.

Strawberries The Sunshine State is the country’s primary location for winter growing and the second largest strawberry producer after California. Though Florida’s acreage is about 28% of California’s, its harvested production is less than 9% of the national total, owing to significantly lower yields due to a shorter production window. Nearly all US berries harvested in the winter months, however, come from the Sunshine State. Acreage peaked in the mid-2010s around 11,000 and in 2020 was just under 10,000. For 2022, the California Strawberry Commission is forecasting total acreage of 38,026, an increase of 4.2% over last year. The California strawberry commission also forecasts Mexican acreage up 27% from 32,200 acres to 40,900 acres. Production in Mexico has increased drastically over the past decade, some competing with Florida’s narrow window of growing opportunity, putting price pressure on local growers.

While citrus greening continues to be the primary threat to the industry, improved production practices (including the expansion of growing under protective screens and higher density plantings), improvements in nutrient allocations, and newly approved bactericides and pesticides are all tools growers are utilizing to fight back. Results of the annual Commercial Citrus Inventory show total citrus acreage is 407,348 acres, down 3% from the last survey and the lowest in a series which began in 1966. The net loss of 12,104 acres is 955 acres more than what was lost last season. New plantings at 10,448 acres are up from the previous season, but total citrus trees, at 59.7 million, are down 1% from the previous season. The 2021-2022 Florida all orange forecast released in December 2021 by the USDA Agricultural Statistics Board is 46 million boxes, down 1 million boxes from the October forecast. If realized, this will be 13% less than last season’s final production.

The industry is facing and will continue to deal with a host of issues, especially the labor crunch and input shortages impacting the entire country. Difficulties abound procuring plastic, irrigation materials, and even repair parts for vehicles. On the employment side, with increasing wages across the country finding domestic workers is challenging, and as pay rises in Mexico it is becoming harder to fill H2-A slots. Additionally, with Mexican acreage expanding, it is likely some experienced labor will decide to remain there. Consumer demand is expected to remain strong nearby, as evidenced by growing acreage in California and Mexico. Long-term, labor issues are likely to speed-up attempts to mechanize harvesting as well as force growers to expand into Central America. Drought and water rationing in the West will likely pressure California acreage, potentially shifting some growers into Florida. Irrigation concerns are expected to boost interest in controlled environment strawberry production, and increasing

Floriculture and Nursery Florida’s floriculture and nursery product industry continues to grow, and is now the largest single commodity by cash receipts in the state. According to USDA, total wholesale sales value for floriculture in the state for 2020 was $1.14 billion, a record, and the top in the country. This is nearly 24% of all floriculture cash receipts nationwide. Growers produce a wide range of commodities from annual and perennial bedding and garden

8 2021 Annual Report

Farm Credit of Central Florida, ACA Paycheck Protection Program (PPP). The PPP provided support to small businesses to cover payroll and certain other expenses. Loans made under the PPP are fully guaranteed by the Small Business Administration (SBA), whose guarantee is backed by the full faith and credit of the United States government. Over the life of the program, the District extended loans to approximately 9,900 borrowers. As of December 31, 2021, the Association had $4 million of these loans outstanding. In addition, through December 31, 2021, the volume of such loans that have received forgiveness from the SBA since the start of the program was $27.4 million.

transportation costs should make local produce more attractive. Further, growth in Central Florida is expected to heighten competition for Florida cropland. Cattle Protein demand has remained strong over the course of the pandemic with meat prices skyrocketing. While feed costs are a main driver in the cattle industry, Florida’s role in production is almost entirely cow-calf operations developing feeder cattle. Total beef cows in the state for 2020 were 929,000, but including calves the overall cattle number was 1.69 million head. This is up slightly from the last three years, though numbers have been declining statewide since the early 2000s. Nationally, cattle herd numbers are lower, supportive of strong continued demand from feedlot operations and processors.

CLIMATE CHANGE Agricultural production is and always has been vulnerable to weather events and climate change. The USDA has recognized that the changing climate presents threats to U.S. and global agricultural production and rural communities. The impact of climate change including its effect on weather is, and will continue to be, a challenge for agricultural producers. Among the risks of climate change are:

While prices last year were especially high, Southeast feeder steers remain elevated, up 9% from this time in 2020. Nationwide, feeder cattle are up more than 20% from the fiveyear average and demand at the consumer level remains strong. Near term risks for Florida’s cattle industry include the potential for drought (with a warmer winter forecasted), and encroaching development buying acres out of production. Long-term, beef consumption in the US is expected to have peaked, with total meat eaten per capita reaching an all-timehigh of 225 pounds in 2020. Further, societal pressures and political volatility could lead to increased regulation on methane emissions, resulting in added risk to producers.

   

rising average temperatures, more frequent and severe storms, more forest fires, and extremes in flooding and droughts.

However, risks associated with climate change are mitigated, to some degree, by U.S. agricultural producers’ ability to navigate changing industry dynamics from numerous perspectives, including trade, government policy, consumer preferences and weather. Producers regularly adopt new technologies, agronomic practices and financial strategies in response to evolving trends to ensure their competitiveness.

COVID-19 OVERVIEW In response to the COVID-19 pandemic, and without disruption to operations, the Association transitioned the vast majority of its employees to working remotely in mid-March 2020. The priority was, and continues to be, to ensure the health and safety of employees, while continuing to serve the mission of providing support for rural America and agriculture. The Association has returned to pre-pandemic working conditions and is allowing customers to visit branches.

LOAN PORTFOLIO The Association provides funds to farmers, rural homeowners, and farm-related businesses for financing of short and intermediate-term loans and long-term real estate mortgage loans through numerous product types. The Association’s loan portfolio is diversified over a range of agricultural commodities in our region, including horticulture, citrus, strawberries, and cattle. Farm size varies and many of the borrowers in the region have diversified farming operations. This factor, along with the numerous opportunities for non-farm income in the area, reduces the level of dependency on a given commodity.

The COVID-19 pandemic has disrupted businesses and the global economy since March 2020. Significant progress was made during 2021 in mitigating the spread of COVID-19 resulting in improving macroeconomic conditions. However, the improvement has been hampered by disease variants, rising inflation, supply chain disruptions and labor shortages in the United States and globally. COVID-19 Support Programs Since the onset of the COVID-19 pandemic, the U.S. government has taken a number of actions by passing six economic relief and stimulus bills to help businesses, individuals, state/local governments and educational institutions that were adversely impacted by the economic disruptions caused by the COVID-19 pandemic. The economic relief resulted in appropriations of approximately $5.4 trillion. The farm sector and farm households were among those impacted and were provided financial assistance through the U.S. Department of Agriculture (USDA) and other government agency programs. Among the many programs was the

9 2021 Annual Report

Farm Credit of Central Florida, ACA The Association’s total servicing loan volume outstanding for the past three years is shown below. Servicing Loan Volume Net Loans Outstanding Participations Sold Available Commitments Investments Total

December 31, 2020 (dollars in thousands) 757,407 62.97% $ 658,098 61.08% 235,364 19.57 191,220 17.75 207,334 17.23 224,078 20.80 2,748 0.23 3,966 0.37 1,202,853 100.00% $ 1,077,362 100.00% 2021

2019 $ 568,435 185,139 201,087 5,262 $ 959,923

59.21% 19.29 20.95 0.55 100.00%

The diversification of the Association loan volume by type for each of the past three years is shown below. Loan Type

2021

Real estate mortgage Production and Intermediate-term Processing and marketing Farm-related business Rural residential real estate Loans to Cooperatives International Communication Power and water/waste disposal Total

450,053 177,705 76,109 21,115 12,993 6,591 6,438 4,961 1,442 757,407

December 31, 2020 (dollars in thousands) 59.42 % $ 389,241 59.15 % 23.46 148,613 22.58 10.05 74,677 11.35 2.79 6,241 0.95 1.71 9,576 1.45 0.87 8,866 1.35 0.85 6,438 0.98 0.66 14,446 2.19 0.19 – – 100.00 % $ 658,098 100.00 %

2019 $

313,117 156,828 60,146 6,609 8,257 2,488 6,435 11,450 3,105 568,435

55.09 % 27.59 10.58 1.16 1.45 0.44 1.13 2.01 0.55 100.00 %

While we make loans and provide financially related services to qualified borrowers in the agricultural and rural sectors and to certain related entities, our loan portfolio is diversified. The distribution of the loan volume by line of business for the past three years is as follows: Line of Business Apopka Plant City Brooksville Lakeland Agribusiness Capital Markets Residential Lending Special Assets

2021 8.07 % 5.36 2.94 2.40 60.65 17.04 1.67 1.87 100.00 %

December 31, 2020 7.45 % 5.05 2.59 2.45 57.11 21.83 0.87 2.65 100.00 %

2019 8.62 % 4.36 2.78 2.32 59.16 18.82 0.53 3.41 100.00 %

Commodity and industry categories are based upon the Standard Industrial Classification (SIC) system published by the federal government. The system is used to assign commodity or industry categories based upon the largest agricultural commodity of the customer. The major commodities in the Association loan portfolio are shown below. The predominant commodities are livestock, strawberries, nursery, fruits and vegetables, and citrus, which constitute over 71 percent of the entire portfolio. Commodity Group per SIC Codes December 31, 2021 Livestock $ 149,125 19.69% Strawberries 128,824 17.01 Nursery 96,670 12.76 Fruits & Vegetables 94,455 12.47 Citrus 69,819 9.22 Landlord/Lessors 46,625 6.16 Timber 45,997 6.07 Blueberries 16,226 2.14 Rural Home 13,474 1.78 Poultry 5,519 0.73 Other 90,673 11.97 Total $ 757,407 100.00%

December 31, 2020 (dollars in thousands) $ 118,098 17.95% 94,578 14.37 80,251 12.19 86,757 13.18 71,309 10.84 19,801 3.01 41,083 6.24 17,092 2.60 9,586 1.46 8,849 1.34 110,694 16.82 $ 658,098 100.00%

10 2021 Annual Report

December 31, 2019 $

86,332 15.19% 79,292 13.95 76,374 13.44 91,714 16.13 54,645 9.61 24,895 4.38 26,942 4.74 18,739 3.30 8,039 1.41 11,240 1.98 90,223 15.87 $ 568,435 100.00%

Farm Credit of Central Florida, ACA For the years ended December 31, 2021, 2020, and 2019, the Association did not have any loans sold with recourse, retained subordinated participation interests in loans sold, or interests in pools of subordinated participation interests.

The Association manages concentration risks, both industry and large borrower, through an internal hold limit policy based on individual loan risk ratings, loss given defaults, and industry concentrations. Industry concentrations for hold limit purposes are calculated using the repayment dependency code rather than the SIC code. As a result, for portfolio management purposes, industry classifications are determined based on high dependency of repayment coming from the actual commodity itself. Repayment ability is closely related to the commodities produced by our borrowers, and increasingly, the off-farm income of borrowers. For example, citrus and livestock industries are a large percent of the total portfolio but each also have very low repayment dependency coming from the actual commodity itself. Portfolio management industry concentrations are classified in three concentration levels based on the industry concentration (with high dependency) as a percent of total ACA capital; 1) High – greater than 100% of total capital; 2) Medium – between 50% and 100% of total capital; and 3) Low – less than 50% of total capital. The Association’s current loan portfolio contains two medium concentrations, nursery and strawberry industries. All other industries are in the low concentration level.

The Association sells qualified long-term residential mortgage loans into the secondary market. For the years ended December 31, 2021, 2020, and 2019, the Association originated loans for resale totaling $13,407, $12,494, and $16,932, respectively, which were sold into the secondary market. The Association also participates in the Farmer Mac Long Term Stand-By program. Farmer Mac was established by Congress to provide liquidity to agricultural lenders. At December 31, 2021, 2020 and 2019, the Association had loans totaling $114,176, $95,951 and $80,486, respectively, that are 100 percent guaranteed by Farmer Mac. The Association additionally has loans wherein a certain portion of the loans are guaranteed by various governmental entities for the purpose of reducing risk. At December 31, 2021, 2020 and 2019, the balance of these loans was $17,089, $20,870 and $19,645, respectively.

December 31, Portfolio Management Industry as % of Capital Nursery Strawberries Cattle Citrus Fruits & Vegetables Blueberries

2021

2020 (% of Total Capital) 76.41 % 68.59 % 62.16 57.37 31.05 41.16 29.29 28.92 8.17 9.73 8.92 9.05

2019

INVESTMENT SECURITIES

62.91 % 54.24 33.91 22.26 9.54 11.44

As permitted under FCA regulations, the Association is authorized to hold eligible investments for the purposes of reducing interest rate risk and managing surplus short-term funds. The Bank is responsible for approving the investment policies of the Association. The Bank annually reviews the investment portfolio of every Association that it funds. The Association’s investments consist of pools of Small Business Administration (SBA) guaranteed loans. These investments carry the full faith and credit of the United States government. The balance of these SBA investments, classified as being held-to-maturity, amounted to $2,748 at December 31, 2021, $3,966 at December 31, 2020, and $5,262 at December 31, 2019. Due to FCA regulations, the Association was not able to purchase new investments for the several years, and as a result, the balance of these investments has decreased each year. However, the FCA issued new regulations effective January 1, 2019 that will allow Associations to begin purchasing investments under specific circumstances. The Association is yet to re-enter the investment market.

The risk in the portfolio associated with commodity concentration and large loans is reduced by the range of diversity of enterprises in the Association’s territory as well as the internal hold limit policy which limits any additional increases to already high concentrations. The increase in loan volume for the twelve months ended December 31, 2021, is primarily attributed to increased demand for loans from within the Association’s charted territory. The short-term portfolio, which is cyclical in nature and heavily influenced by operating-type loans, normally reaches a minimum balance in August or September and rapidly increases in the fall months as strawberry and other winter vegetable growers increase their borrowings to prepare for the next crop season. The Association has grown the long-term portfolio through increased long term fully funding loans with guarantees.

CREDIT RISK MANAGEMENT Credit risk arises from the potential inability of an obligor to meet its repayment obligation. As part of the process to evaluate the success of a loan, the Association continues to review the credit quality of the loan portfolio on an ongoing basis. With the approval of the Association Board of Directors, the Association establishes underwriting standards and lending policies that provide direction to loan officers and credit staff. Underwriting standards include, among other things, an evaluation of:

Loan participations purchased provides a means for the Association to spread credit concentration risk and realize nonpatronage sourced interest and fee income, which strengthens its capital position. Loan Participations: Participations Purchased – FCS Institutions Participations Sold Total

2021

December 31, 2020 (dollars in thousands)

$ 133,347 (235,364) $ (102,017)

$ 144,715 (191,220) $ (46,505)

2019

 

$ 107,322 (185,139) $ (77,817)

11 2021 Annual Report

Character – borrower integrity and credit history Capacity – repayment capacity of the borrower based on cash flows from operations or other sources of income

Farm Credit of Central Florida, ACA   

High-Risk Assets

Collateral – protection for the lender in the event of default and a potential secondary source of repayment Capital – ability of the operation to survive unanticipated risks Conditions – intended use of the loan funds

The Association’s loan portfolio is divided into performing and high-risk categories. The Special Assets Management Department is responsible for servicing loans classified as highrisk. The high-risk assets, including accrued interest, are detailed below:

The credit risk management process begins with an analysis of the borrower’s credit history, repayment capacity, and financial position. Repayment capacity focuses on the borrower’s ability to repay the loan based upon cash flows from operations or other sources of income, including non-farm income. Real estate loans must be collateralized by first liens on the real estate (collateral). As required by FCA regulations, each institution that makes loans on a collateralized basis must have collateral evaluation policies and procedures. Long term real estate mortgage loans may be made only in amounts up to 85 percent of the original appraised value of the property taken as collateral or up to 97 percent of the appraised value if guaranteed by a state, federal, or other governmental agency. The actual loan to appraised value when loans are made is generally lower than the statutory maximum percentage. With certain exceptions identified in Association policy, appraisals are required for loans of more than $250,000. The ACA will, on occasion, make loans in amounts that exceed the above advance rates for very strong borrowers when the loan will be repaid in less than 10 years. In addition, each loan is assigned a credit risk rating based upon the underwriting standards. This credit risk rating process incorporates objective and subjective criteria to identify inherent strengths, weaknesses, and risks in a particular relationship.

High-risk Assets Nonaccrual loans Restructured loans Accruing loans 90 days past due Total high-risk loans Other property owned Total high-risk assets Ratios Nonaccrual loans to total loans High-risk assets to total assets

  



Acceptable – Assets are expected to be fully collectible and represent the highest quality. Other Assets Especially Mentioned (OAEM) – Assets are currently collectible but exhibit some potential weakness. Substandard – Assets exhibit some serious weakness in repayment capacity, equity, and/or collateral pledged on the loan. Doubtful – Assets exhibit similar weaknesses to substandard assets. However, doubtful assets have additional weaknesses in existing facts, conditions and values that make collection in full highly questionable. Loss – Assets are considered uncollectible.

2021 99.13% 0.87% 100.00%

2020 99.45% 0.55% 100.00%

$ $

0.58% 0.84%

0.83% 1.27%

1.23% 2.57%

Loan restructuring is available to financially distressed borrowers. Restructuring of loans occurs when the Association grants a concession to a borrower based on either a court order or good faith in a borrower’s ability to return to financial viability. The concessions can be in the form of a modification of terms or rates, a compromise of amounts owed, or deed in lieu of foreclosure. Other receipts of assets and/or equity to pay the loan in full or in part are also considered restructured loans. The type of alternative financing structure chosen is based on minimizing the loss incurred by both the Association and the borrower.

The following table presents selected statistics related to the credit quality of loans including accrued interest at December 31. Credit Quality Acceptable & OAEM Substandard Total

Nonaccrual loans represent all loans where there is a reasonable doubt as to the collection of principal and/or future interest accruals, under the contractual terms of the loan. In substance, nonaccrual loans reflect loans where the accrual of interest has been suspended. Nonaccrual loans decreased $1,081 or 19.78% in 2021. This decrease is primarily the result of several nonaccrual liquidations and upgrades out of the nonaccruing portfolio. The largest nonaccrual sectors are blueberry loans due to the weakness associated with the individual borrower’s repayment capacity and continuing decline of overall collateral values. Of the $4,383 in nonaccrual volume at December 31, 2021, $678 or 15.47%, was current as to scheduled principal and interest payments, but did not meet all regulatory requirements to be transferred into accrual status compared to 61.11% and 18.21% at December 31, 2020 and 2019, respectively. The Association had no other property owned at December 31, 2021. During 2021, the Association acquired 1 property, sold two properties and recorded net gain on other property owned of $158.

We review the credit quality of the loan portfolio on an ongoing basis as part of our risk management practices. Each loan is classified according to the Uniform Classification System, which is used by all Farm Credit System institutions. Below are the classification definitions. 

December 31, 2020 2019 (dollars in thousands) 4,383 $ 5,464 $ 6,967 2,247 3,051 8,218 – – – 6,630 $ 8,515 $ 15,185 – 227 – 6,630 $ 8,742 $ 15,185

2021

Allowance for Loan Losses The allowance for loan losses at each period end was considered by Association management to be adequate to absorb probable losses existing in and inherent to its loan portfolio. The allowance for loan losses is broken down between specific reserves assigned to an individual loan and general reserves which are available for the expected losses within the entire portfolio. The current allowance for loan losses at December 31, 2021 contains $994 in specific reserves and $2,073 in general reserves. The following table presents the

2019 98.58% 1.42% 100.00%

12 2021 Annual Report

Farm Credit of Central Florida, ACA activity in the allowance for loan losses for the most recent three years. Allowance for Loan Losses Activity: Balance at beginning of year

Charge-offs: Real estate mortgage Production and intermediate-term Rural residential real estate Total charge-offs

The allowance for loan losses as a percentage of loans outstanding and as a percentage of certain other credit quality indicators is shown below:

Year Ended December 31, 2021 2020 2019 (dollars in thousands) 3,283 $ 3,113 $ 3,270 – (7) – (7)

– (6) (61) (67)

(8) (6) (10) (24)

Recoveries: Real estate mortgage Production and intermediate-term Rural residential real estate Total recoveries

36 75 20 131

7 – 16 23

92 132 67 291

Net (charge-offs) recoveries

124

(44)

267

Provision for (reversal of allowance for) loan losses Balance at end of year

Ratio of net (charge-offs) recoveries during the period to average loans outstanding during the period

(340) 3,067

0.018%

214 3,283

(0.007)%

Allowance for Loan Losses as a Percentage of: Total loans Nonperforming loans Nonaccrual loans

2019 0.55% 20.50% 44.68%

RESULTS OF OPERATIONS

(424) 3,113

Net Interest Income Net interest income was $16,356, $15,332, and $14,737 in 2021, 2020 and 2019, respectively. Net interest income is the difference between interest income and interest expense. Net interest income is the principal source of earnings for the Association and is impacted by volume, yields on assets and cost of debt. Higher average daily balances on loan volumes, offset by lower rates on loanable funds are the primary reasons for the increases over 2021. The effects of changes in average volume and interest rates on net interest income over the past three years are presented in the following table:

0.050%

The allowance for loan losses by loan type for the most recent three years is as follows:

Real estate mortgage Production and intermediate-term Agribusiness Communication Power and water/waste disposal Rural residential real estate International Total loans

December 31, 2020 0.50% 38.56% 60.08%

Please refer to Note 3, Loans and Allowance for Loan Losses, of the Notes to the Consolidated Financial Statements, for further information concerning the allowance for loan losses. The Allowance for Loan Losses was determined according to generally accepted accounting principles.

The $340 reversal of allowance for loan loss in 2021 was primarily the result of improved credit quality. The net loan recoveries of $131 is due to the payment of allocated surplus on loans with prior charge-offs.

Allowance for Loan Losses by Type

2021 0.40% 46.26% 69.97%

Change in Net Interest Income:

December 31, 2021 2020 2019 (dollars in thousands) 1,033 $ 1,196 $ 1,468 1,750 1,775 1,390 257 257 107 6 20 19 2 – 17 17 33 110 2 2 2 3,067 $ 3,283 $ 3,113

Volume*

Rate

Total

(dollars in thousands) 12/31/21 - 12/31/20 Interest income Interest expense Change in net interest income

$ 3,220 1,512 $ 1,708

$ (2,232) (1,548) $ (684)

12/31/20 - 12/31/19 Interest income Interest expense Change in net interest income

$ 3,215 2,048 $ 1,167

$ (5,027) (4,455) $ (572)

$ (1,812) (2,407) $ 595

988 (36) 1,024

* Volume variances can be the result of increased/decreased loan volume or from changes in the percentage composition of assets and liabilities between periods.

Noninterest Income Noninterest income for each of the three years ended December 31 is shown in the following table: For the Year Ended December 31, Noninterest Income 2021 2020 2019 (dollars in thousands) Loan fees $ 860 $ 1,108 $ 482 Fees for financially related services 2,628 1,506 1,034 Patronage refund from other Farm Credit Institutions 13,573 10,819 6,744 Gains (losses) on other rural home loans, net 337 227 353 Gains (losses) on sales of premises and equipment, net 57 (69) 16 Gains (losses) on other transactions 85 60 72 Insurance Fund refunds – 107 116 Other noninterest income 7 2 5 Total noninterest income $ 17,547 $ 13,760 $ 8,822

13 2021 Annual Report

Percentage Increase/(Decrease) 2021/ 2020/ 2020 2019 (22.38)% 74.50 25.46 48.46 (182.61) 41.67 (100.00) 250.00 27.52 %

129.88 % 45.65 60.42 (35.69) (531.25) (16.67) (7.76) (60.00) 55.97 %

Farm Credit of Central Florida, ACA crop insurance sales. Gains on other rural home loans increased $110 or 48.46% from the prior year due to increased residential lending activity. Loan fees decreased $248 or 22.38% primarily due to decreased PPP fees. During 2021 the Association did not receive insurance premium refunds from the Farm Credit System Insurance Corporation (FCSIC), which insures the System’s debt obligations, as opposed to $107 in 2020. These payments are nonrecurring and resulted from the assets of the Farm Credit Insurance Fund exceeding the secure base amount as defined by the Farm Credit Act.

Noninterest income increased $3,787 or 27.52% for December 31, 2021, as compared to the same period of 2020. December 31, 2020 noninterest income increased $4,938 or 55.97% when compared to the same period of 2019. The increase in noninterest income for 2021 and 2020 is primarily the result of increases in fees from financially related services and patronage refunds from other Farm Credit Institutions. The Association received a $7,615 special patronage distribution from the Bank in 2021 as compared to $5,757 in 2020 and $2,518 in 2019. Fees for financial related services increased $1,122 or 74.50% in 2021 due to increased focus on Noninterest Expense

Noninterest expense for each of the three years ended December 31 is shown in the following table: For the Year Ended December 31, Noninterest Expense 2021 2020 2019 (dollars in thousands) Salaries and employee benefits $ 8,624 $ 8,354 $ 7,867 Occupancy and equipment 976 1,065 735 Insurance Fund premium 868 459 379 (Gains) losses on other Property owned, net (158) 15 1 Other operating expenses 2,740 2,813 2,718 Total noninterest expense $ 13,050 $ 12,706 $ 11,700

Percentage Increase/(Decrease) 2021/ 2020/ 2020 2019 3.23 % (8.36) 89.11 (1,153.33) (2.60) 2.71 %

6.19% 44.90 21.11 1,400.00 3.50 8.60%

months, with an additional 10 basis point premium on the average principal outstanding of nonaccrual loans and other than temporarily impaired investments For 2019, the FCSIC set premiums at 9 basis points on adjusted insured debt outstanding with an additional 10 basis point premium on the average principal outstanding of nonaccrual loans and other than temporarily impaired investments.

Noninterest expense increased $344 or 2.71 percent for December 31, 2021, as compared to the same period of 2020 and December 31, 2020 increased $1,006 or 8.6 percent compared to the same period of 2019. The primary reason for the increase in 2021 were the increases in salaries and employee benefits and insurance fund premiums. During 2021, salaries and employee benefits increased 3.23% from 2020 as a result of increased headcount and increased pension expenses. The 6.19% increase during 2020 from 2019 was also due to increased headcount and increased pension expenses.

Income Taxes The Association recorded $35 provision for income taxes for the year ended December 31, 2021, as compared to $75 provision for 2020 and none for 2019. The 2021 and 2020 tax provision is the direct result of non-patronage based PPP fee income. Refer to Note 2, Summary of Significant Accounting Policies, Income Taxes, of the Notes to the Consolidated Financial Statements, for more information concerning Association income taxes.

Occupancy and equipment expenses decreased 8.36% from 2020 as a result of the nonrecurring lease expenses in 2020 offset by the normal increases in occupancy and equipment. The 44.90% during 2020 was the result of nonrecurring lease expenses while the Association was building out the new Administration building.

Key Results of Operations Comparisons Key results of operations comparisons for each of the twelve months ended December 31 are shown in the following table:

Other operating expenses decreased 2.6% during 2021 as compared to 2020 as a result of decreased training, advertising and public relations and data processing, offset by increased purchased services.

Key Results of Operations Comparisons Return on average assets Return on average members’ equity Net interest income as a percentage of average earning assets Net (charge-offs) recoveries to average loans

Insurance Fund premiums increased 89.11 percent for the twelve months ended December 31, 2021, compared to the same period of 2020. The Farm Credit System Insurance Corporation (FCSIC) changed the methodology in assessing the insurance premiums as a result of the 2008 Farm Bill. For 2021, the FCSIC set premiums at 16 basis points on adjusted insured debt outstanding with an additional 10 basis point premium on the average principal outstanding of nonaccrual loans and other than temporarily impaired investments. For 2020, the FCSIC set premiums at 8 basis points on adjusted insured debt outstanding for the first six months and 11 basis points for the last six

For the 12 Months Ended 12/31/21 12/31/20 12/31/19 3.05% 2.59% 2.23% 16.92% 13.56% 10.78% 2.43%

2.54%

2.74%

0.018%

(0.007)%

0.05%

The Association’s return on average assets increased by 46 basis points and the return on average members’ equity increased by 336 basis points during 2021 compared to 2020 due to increased income, primarily increased special patronage from AgFirst and

14 2021 Annual Report

Farm Credit of Central Florida, ACA to the Bank. The Association's investments and other secondary market programs provide additional liquidity. Sufficient liquid funds have been available to meet all financial obligations. There are no known trends likely to result in a liquidity deficiency for the Association.

increased income from financially related services. The net interest income as a percentage of average earning assets, or net interest margin decreased 11 basis points to 2.43% mostly due to lower earnings on loanable funds due to lower market rates. The percentage of net charge-offs and recoveries to average loans was 0.018 percent in the 2021 reporting period and the Association’s recoveries were higher than charge-offs.

The Association had no lines of credit from third party financial institutions as of December 31, 2021.

A key factor in the growth of net income for future years will be continued improvement in net interest and noninterest income as well as maintaining asset quality. Our goal is to generate earnings sufficient to fund operations, adequately capitalize the Association, and achieve an adequate rate of return for our members. To meet this goal, the agricultural economy must continue to grow and the Association must meet certain objectives. These objectives are to attract and maintain high quality loan volume priced at competitive rates and to manage credit risk in our entire portfolio, while efficiently meeting the credit needs of our members.

Funds Management The Bank and the Association manage assets and liabilities to provide a broad range of loan products and funding options, which are designed to allow the Association to be competitive in all interest rate environments. The primary objective of the asset/liability management process is to provide stable and rising earnings, while maintaining adequate capital levels by managing exposure to credit and interest rate risks. Demand for loan types is a driving force in establishing a funds management strategy. The Association offers fixed, adjustable and variable rate loan products that are marginally priced according to financial market rates. Variable rate loans may be indexed to market indices such as the Prime Rate or the 30-day and 90-day London Interbank Offered Rate (LIBOR). Adjustable rate mortgages are indexed to U.S. Treasury Rates. Fixed rate loans are priced based on the current cost of System debt of similar terms to maturity.

LIQUIDITY AND FUNDING SOURCES Liquidity and Funding The principal source of funds for the Association is the borrowing relationship established with the Bank through a General Financing Agreement (GFA). The GFA utilizes the Association’s credit and fiscal performance as criteria for establishing a line of credit on which the Association may draw funds. The Bank advances the funds to the Association, creating notes payable (or direct loans) to the Bank. The Bank manages interest rate risk through direct loan pricing and asset/liability management. The notes payable are segmented into variable rate and fixed rate components. The variable rate note is utilized by the Association to fund variable rate loan advances and operating funds requirements. The fixed rate note is used specifically to fund fixed rate loan advances made by the Association. Association capital levels effectively create a borrowing margin between the amount of loans outstanding and the amount of notes payable outstanding. This margin is commonly referred to as “Loanable Funds.”

The majority of the interest rate risk in the Association’s Consolidated Balance Sheets is transferred to the Bank through the notes payable structure. The Bank, in turn, actively utilizes funds management techniques to identify, quantify and control risk associated with the loan portfolio. Relationship with the Bank The Association’s statutory obligation to borrow only from the Bank is discussed in Note 6, Notes Payable to AgFirst Farm Credit Bank, of the Notes to the Consolidated Financial Statements in this annual report. The Bank’s ability to access capital of the Association is discussed in Note 4, Investment in Other Farm Credit Institutions, of the Notes to the Consolidated Financial Statements. The Bank’s role in mitigating the Association’s exposure to interest rate risk is described in the “Liquidity and Funding” section of this Management’s Discussion and Analysis and in Note 6, Notes Payable to AgFirst Farm Credit Bank, included in this annual report.

Total notes payable to the Bank at December 31, 2021, was $635,922 as compared to $548,714 at December 31, 2020 and $463,711 at December 31, 2019. The increase of 15.89 percent compared to December 31, 2020 was attributable to the increase in total loan assets. The average daily volume of outstanding notes payable to the Bank was $553,705 and $491,021 for the years ended December 31, 2021 and 2020, respectively. Refer to Note 6, of the Notes to the Consolidated Financial Statements, for weighted average interest rates and maturities, and additional information concerning the Association’s notes payable.

CAPITAL RESOURCES Capital serves to support asset growth and provide protection against unexpected credit and interest rate risk and operating losses. Capital is also needed for future growth and investment in new products and services.

Liquidity management is the process whereby funds are made available to meet all financial commitments including the extension of credit, payment of operating expenses and payment of debt obligations. The Association receives access to funds through its borrowing relationship with the Bank and from income generated by operations. The liquidity policy of the Association is to manage cash balances to maximize debt reduction and to increase loan volume. As borrower payments are received, they are applied to the Association’s note payable

The Association Board of Directors establishes, adopts, and maintains a formal written capital adequacy plan to ensure that adequate capital is maintained for continued financial viability, to provide for growth necessary to meet the needs of members/borrowers, and to ensure that all stockholders are treated equitably. There were no material changes to the capital plan for 2021 that would affect minimum stock purchases or

15 2021 Annual Report

Farm Credit of Central Florida, ACA Effective January 1, 2017, the regulatory capital requirements for System Banks and associations were modified. The new regulations ensure that the System’s capital requirements are comparable to the Basel III framework and the standardized approach that the federal banking regulatory agencies have adopted. New regulations replaced core surplus and total surplus ratios with common equity tier 1 (CET1) capital, tier 1 capital, and total capital risk-based capital ratios. The new regulations also include a tier 1 leverage ratio and an unallocated retained earnings equivalents (UREE) leverage ratio. The permanent capital ratio (PCR) remains in effect.

would have an effect on the Association’s ability to retire stock and distribute earnings. Total members’ equity at December 31, 2021, increased $8,615 to $127,308 from the December 31, 2020, total of $118,693. At December 31, 2020, total members’ equity increased 4.62 percent from the December 31, 2019 total of $113,447. The increase in 2021 was primarily attributed to the positive earnings which caused an increase in retained earnings (allocated surplus and unallocated surplus) and by the increase in capital stock and participation certificates being offset by the payment of $11,600 in cash patronage distributions and the revolvement of $1,276 in allocated surplus.

FCA sets minimum regulatory capital requirements with a capital conservation buffer for System banks and associations. Capital adequacy is evaluated using a number of regulatory ratios. According to the FCA regulations, each institution’s permanent capital ratio is calculated by dividing permanent capital by a risk adjusted asset base. Risk adjusted assets mean the total dollar amount of the institution’s assets adjusted by an appropriate credit conversion factor as defined by regulation. For all periods represented, the Association exceeded minimum regulatory standards for all the ratios. The Association’s capital ratios as of December 31 and the FCA minimum requirements follow:

Total capital stock and participation certificates were $1,149 on December 31, 2021, compared to $1,008 on December 31, 2020 and $942 on December 31, 2019. The 2021 increase from 2020 was attributed to the issuance of new protected borrower stock and participation certificates due to increased loan volume, partially offset by the retirement of protected borrower stock and participation certificates on loans liquidated in the normal course of business and the retirement of excess stock through revolvement. The following sets forth the regulatory capital ratios:

Ratio Risk-adjusted ratios: CET1 Capital Ratio Tier 1 Capital Ratio Total Capital Ratio Permanent Capital Ratio Non-risk-adjusted: Tier 1 Leverage Ratio UREE Leverage Ratio

Minimum Requirement

Capital Conservation Buffer*

Minimum Requirement with Capital Conservation Buffer

2021

2020

2019

Capital Ratios as of

4.5% 6.0% 8.0% 7.0%

2.50% 2.50% 2.50% –%

7.00% 8.50% 10.50% 7.00%

16.74% 16.74% 17.17% 16.81%

17.87% 17.87% 18.40% 17.97%

20.04% 20.04% 20.48% 20.13%

4.0% 1.5%

1.00% –%

5.00% 1.50%

16.32% 14.34%

17.41% 15.00%

19.49% 16.48%

* The capital conservation buffers have a 3 year phase-in period and became fully effective January 1, 2021.

If the capital ratios fall below the minimum regulatory requirements, including the buffer amounts, capital distributions (equity redemptions, dividends, and patronage) and discretionary senior executive bonuses are restricted or prohibited without prior FCA approval. The decrease in the Association’s Permanent Capital Ratio for December 31, 2021 from December 31, 2020 was attributed to increased risk weighted assets outpacing the increase in capital. The increase in the actual dollar capital is due to 2021 earnings. There are no trends, commitments, contingencies, or events that are likely to affect the Association’s ability to meet regulatory minimum capital standards and capital adequacy requirements. See Note 7, Members’ Equity, of the Consolidated Financial Statements, for further information concerning capital resources. levels, and for reasonable reserves for necessary purposes of the Association. After excluding net earnings attributable to (a) the portion of loans participated to another institution, (b) non-patronage participation loans purchased, and (c) other non-patronage sourced activities, the remaining consolidated net earnings are eligible for allocation to borrowers. Refer to Note 7, Members’ Equity, of the Notes to the Consolidated Financial Statements, for more information concerning the patronage distributions. The Association declared patronage distributions of $11,600 in 2021, $9,500 in 2020 and $6,500 in 2019.

PATRONAGE PROGRAM Prior to the beginning of any fiscal year, the Association’s Board of Directors, by adoption of a resolution, may establish a Patronage Allocation Program to distribute its available consolidated net earnings. This resolution provides for the application of net earnings in the manner described in the Association’s Bylaws. This includes the setting aside of funds to increase surplus to meet minimum capital adequacy standards established by FCA Regulations, to increase surplus to meet Association capital adequacy standards to a level necessary to support competitive pricing at targeted earnings

16 2021 Annual Report

Farm Credit of Central Florida, ACA 

YOUNG, BEGINNING AND SMALL (YBS) FARMERS AND RANCHERS PROGRAM



The Association’s mission is to provide financial services to agriculture and the rural community, which includes providing credit to Young*, Beginning** and Small*** farmers. Because of the unique needs of these individuals, and their importance to the future growth of the Association, the Association has established annual marketing goals to increase our market share of loans to YBS farmers. Specific marketing plans have been developed to target these groups, and resources have been designated to help ensure YBS borrowers have access to a stable source of credit. As a result, 2021 goals for new volume were established. In 2021 the Association achieved all of its YBS goals. 2021 YBS Goals and Results Young # of New Loans $ of New Loans Beginning # of New Loans $ of New Loans Small # of New Loans $ of New Loans Total YBS Program # of New Loans $ of New Loans

2021 Goal

2021 Result

     

% of Goal

25 $1,875

68 $9,289

272.00% 495.41%

80 $8,000

202 $44,368

252.50% 554.60%

130 $13,000

350 $44,459

269.23% 341.99%

235 $22,875

620 $98,116

263.83% 428.92%

Support of 4-H, FFA, and young farmer organizations through sponsorships and donations. Sponsor seminars on farm transition planning and financial management. Youth livestock financing program for Youth Steer and Swine Shows. Available territory wide. Financial Training in cooperation with Florida Southern College, Citrus and Horticulture Dept. Employees serve as judges for youth livestock project record books. Sponsor participants and participate in Florida Council of Coops, Young Cooperator Conference. Sponsor Florida Nursery Growers Young Professional Award. Sponsors and attends the statewide Farm Bureau Young Farmers and Ranchers Leadership Conference.

In addition, the Association’s lending personnel actively participate in various commodity trade group conferences and continuing education programs. Association lenders have established performance goals to provide informational and financial training to agricultural youth groups and industry trade associations. The Association is committed to the future success of Young, Beginning and Small farmers. *

Young farmers are defined as those farmers, ranchers, producers or harvesters of aquatic products who are age 35 or younger as of the date the loan is originally made. ** Beginning farmers are defined as those farmers, ranchers, producers or harvesters of aquatic products who have 10 years or less farming or ranching experience as of the date the loan is originally made. *** Small farmers are defined as those farmers, ranchers, producers or harvesters of aquatic products who normally generate less than $250 thousand in annual gross sales of agricultural or aquatic products at the date the loan is originally made.

The following table outlines the loan volume and number of YBS loans in the loan portfolio for the Association.

Young Beginning Small

As of December 31, 2021 Number of Loans Amount of Loans 167 $16,927 513 $102,816 936 $87,484

Note: For purposes of the above table, a loan could be classified in more than one category, depending upon the characteristics of the underlying borrower.

The 2017 USDA Ag census data has been used as a benchmark to measure penetration of the 19,235 reported farmers of which by definition 897 or 4.67 percent were Young, 5,629 or 29.26 percent were Beginning, and 12,709 or 66.07 percent were Small. Comparatively, as of December 31, 2021, the demographics of the Association’s agricultural portfolio contained 1,616 YBS farmers, of which by definition 167 or 10.33 percent were Young, 513 or 31.75 percent were beginning and 936 or 57.92 percent were Small.

REGULATORY MATTERS On September 9, 2021, the FCA adopted a final rule that amended certain sections of the FCA’s regulations to provide technical corrections, amendments, and clarification to certain provisions in the FCA’s tier 1/tier 2 capital framework for the Farm Credit System. The rule incorporates guidance previously provided by the FCA related to its tier 1/tier 2 capital framework as well as ensures that the FCA’s capital requirements continue to be comparable to the standardized approach that the other federal banking regulatory agencies have adopted. The final rule became effective on January 1, 2022.

The Association Board of Directors has adopted a Young, Beginning, and Small Farmer Plan with specific goals for the number of loans and new volume closed for 2021 and two succeeding years. The Association will continue to review the demographics of its territory during 2021 utilizing 2017 Ag census data.

On August 26, 2021, the FCA issued a proposed rule to revise its regulatory capital requirements to define and establish riskweightings for High Volatility Commercial Real Estate (HVCRE) by assigning a 150 percent risk-weighting to such exposures, instead of the current 100 percent. The proposed rule would ensure that the FCA’s rule remains comparable with the capital rule of other federal banking regulatory agencies

The following strategies and outreach programs have been conducted which assists and supports the Association’s efforts to meet its objectives and goals for financing to the Young, Beginning, and Small farmers.

17 2021 Annual Report

Farm Credit of Central Florida, ACA and recognizes the increased risk posed by HVCRE exposures. The public comment period is open until January 24, 2022. On June 30, 2021, the FCA issued an advance notice of proposed rulemaking (ANPRM) that seeks public comments on whether to amend or restructure the System bank liquidity regulations. The purpose of this advance notice is to evaluate the applicability of the Basel III framework to the Farm Credit System and gather input to ensure that System banks have the liquidity to withstand crises that adversely impact liquidity and threaten their viability. The public comment period ended on November 27, 2021.

over the lives of the financial instruments, which could adversely affect the value of, and return on, instruments held.

On September 23, 2019, the FCA issued a proposed rule that would ensure the System’s capital requirements, including certain regulatory disclosures, reflect the current expected credit losses methodology, which revises the accounting for credit losses under U.S. generally accepted accounting principles. The proposed rule identifies which credit loss allowances under the Current Expected Credit Losses (CECL) methodology in the Financial Accounting Standards Board’s “Measurement of Credit Losses on Financial Instruments” are eligible for inclusion in a System institution’s regulatory capital. Credit loss allowances related to loans, lessor’s net investments in leases, and held-to-maturity debt securities would be included in a System institution’s Tier 2 capital up to 1.25 percent of the System institution’s total risk-weighted assets. Credit loss allowances for available-for-sale debt securities and purchased credit impaired assets would not be eligible for inclusion in a System institution’s Tier 2 capital. In addition, the proposed regulation does not include a transition phase-in period for the CECL day 1 cumulative effect adjustment to retained earnings on a System institution’s regulatory capital ratios. The public comment period ended on November 22, 2019.

On December 8, 2021, the FCA issued another informational memorandum to provide additional guidance to Farm Credit System institutions on their transition away from LIBOR. The guidance encourages Farm Credit System institutions to stop entering into new contracts that reference LIBOR as soon as practicable and in any event no later than December 31, 2021. Entering into new LIBOR-referenced contracts after that date would present safety and soundness risk. The guidance also provides clarity on what the FCA considers a new LIBORindexed contract; whether purchases of legacy LIBOR-indexed loans and investments are deemed new contracts; limited exceptions for entering into new LIBOR contracts that reduce or hedge risk in legacy LIBOR contracts; and the due diligence and other procedures required before using other benchmark/reference rate alternatives to LIBOR (beyond SOFR), including credit-sensitive alternative rates.

The FCA has issued guidelines with similar guidance as the U.S. prudential regulators but applicable for System institutions to follow as they prepare for the expected phase-out of LIBOR. The guidelines direct each System institution to develop a LIBOR transition plan designed to provide an orderly roadmap of actions that will reduce LIBOR exposure, stop the inflow of new LIBOR volume, and adjust operating processes to implement alternative reference rates.

The Association has implemented a LIBOR transition plan and continues to analyze potential risks associated with the LIBOR transition, including, but not limited to, financial, market, accounting, operational, legal, tax, reputational, and compliance risks. On July 26, 2021, the Alternative Reference Rates Committee (ARRC) announced it will recommend the CME Group’s forward-looking SOFR term rates. The ARRC’s formal recommendation of SOFR term rates is a major milestone and is expected to increase the volume of transactions quoted in SOFR, supporting the implementation of the transition away from LIBOR.

FUTURE OF LIBOR In 2017, the United Kingdom’s Financial Conduct Authority (UK FCA), which regulates LIBOR, announced its intention to stop persuading or compelling the group of major banks that sustains LIBOR to submit rate quotations after 2021.

On October 20, 2021, the U.S. prudential regulators issued a joint statement emphasizing the expectation that supervised institutions with LIBOR exposure continue to progress toward an orderly transition away from LIBOR, reiterating that supervised institutions should, with limited exceptions, cease entering into new contracts that use US dollar LIBOR as a reference rate as soon as practicable, but no later than December 31, 2021. They further stated that entering into new contracts, including derivatives, after that date would create safety and soundness risks. The joint statement clarified that entering into such new contracts would include an agreement that (1) creates additional LIBOR disclosure or (2) extends the term of an existing LIBOR contract, but that a draw on an existing agreement that is legally enforceable, e.g., a committed credit facility, would not be a new contract. The joint statement also provided considerations when assessing the appropriateness of alternative reference rates used in lieu of LIBOR and the regulator expectation that new or updated LIBOR contracts include strong and clearly defined fallback rates for when the initial reference rate is discontinued.

On March 5, 2021, ICE Benchmark Administration (IBA) (the entity that is responsible for calculating LIBOR) announced its intention to cease the publication of the one-week and twomonth US dollar LIBOR settings immediately following the LIBOR publication on December 31, 2021, and the remaining US dollar LIBOR settings immediately following the LIBOR publication on June 30, 2023. On the same day, the UK FCA announced that the IBA had notified the UK FCA of its intent, among other things, to cease providing certain US dollar LIBOR settings as of June 30, 2023. In its announcement, the UK FCA confirmed that all 35 LIBOR tenors (including with respect to US dollar LIBOR) will be discontinued or declared nonrepresentative as of either: (a) immediately after December 31, 2021 or (b) immediately after June 30, 2023. The Association has exposure to LIBOR arising from loans made to customers, Systemwide Debt Securities issued by the Funding Corporation on the Bank’s behalf, and preferred stock issued by the Bank. Alternative reference rates that replace LIBOR may not yield the same or similar economic results

18 2021 Annual Report

Farm Credit of Central Florida, ACA The following is a summary of outstanding variable-rate financial instruments tied to LIBOR at December 31, 2021:

(dollars in millions) Loans Total Assets Note Payable to AgFirst Farm Credit Bank Total Liabilities

Due in 2023 on or Before 6/30

Due in 2022 $ 10,289 $ 10,289

$ $

Due after June 30, 2023

1,695 $ 105,576 1,695 $ 105,576

The LIBOR transition plan includes implementing fallback language into variable-rate financial instruments maturing after December 31, 2021 which provides the ability to move these instruments to another index if the LIBOR market is no longer viable. At December 31, 2021, 100.00 percent of loans maturing after December 31, 2021 contain fallback language.

Total $ 117,560 $ 117,560

$ 8,571

1,412 $ 87,946

$ 97,929

$ 8,571

1,412 $ 87,946

$ 97,929

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS Please refer to Note 2, Summary of Significant Accounting Policies, in the Notes to the Consolidated Financial Statements for recently issued accounting pronouncements. The following Accounting Standards Updates (ASUs) were issued by the Financial Accounting Standards Board (FASB) but have not yet been adopted: Summary of Guidance

•

• •

• • •

Adoption and Potential Financial Statement Impact

ASU 2016-13 – Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments Replaces multiple existing impairment standards by establishing a single • Implementation efforts began with establishing a cross-discipline framework for financial assets to reflect management’s estimate of current governance structure utilizing common guidance developed across the expected credit losses (CECL) over the entire remaining life of the Farm Credit System. The implementation includes identification of key financial assets. interpretive issues, scoping of financial instruments, and assessing Changes the present incurred loss impairment guidance for loans to an existing credit loss forecasting models and processes against the new expected loss model. guidance. Modifies the other-than-temporary impairment model for debt securities to • The new guidance is expected to result in a change in allowance for credit require an allowance for credit impairment instead of a direct write-down, losses due to several factors, including: which allows for reversal of credit impairments in future periods based on 1. The allowance related to loans and commitments will most likely improvements in credit quality. change because it will then cover credit losses over the full Eliminates existing guidance for purchased credit impaired (PCI) loans, remaining expected life of the portfolio, and will consider expected and requires recognition of an allowance for expected credit losses on future changes in macroeconomic conditions, these financial assets. 2. An allowance will be established for estimated credit losses on any Requires a cumulative-effect adjustment to retained earnings as of the debt securities, beginning of the reporting period of adoption. 3. The nonaccretable difference on any PCI loans will be recognized Effective for fiscal years beginning after December 15, 2022, and interim as an allowance, offset by an increase in the carrying value of the periods within those fiscal years. Early application is permitted. related loans. • The extent of allowance change is under evaluation, but will depend upon the nature and characteristics of the financial instrument portfolios, and the macroeconomic conditions and forecasts at the adoption date. • The guidance is expected to be adopted in first quarter 2023.

19 2021 Annual Report

Farm Credit of Central Florida, ACA

Disclosure Required by Farm Credit Administration Regulations Description of Business

Legal Proceedings

Descriptions of the territory served, persons eligible to borrow, types of lending activities engaged in, financial services offered and related Farm Credit organizations are incorporated herein by reference to Note 1, Organization and Operations, of the Consolidated Financial Statements included in this Annual Report to shareholders.

Information, if any, to be disclosed in this section is incorporated herein by reference to Note 11, Commitments and Contingencies, of the Consolidated Financial Statements included in this Annual Report.

The description of significant developments that had or could have a material impact on earnings or interest rates to borrowers, acquisitions or dispositions of material assets, material changes in the manner of conducting the business, seasonal characteristics, and concentrations of assets, if any, is incorporated in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this Annual Report.

Information to be disclosed in this section is incorporated herein by reference to Note 7, Members’ Equity, of the Consolidated Financial Statements included in this Annual Report.

Description of Capital Structure

Description of Liabilities The description of liabilities, contingent liabilities and obligations to be disclosed in this section is incorporated herein by reference to Notes 2, 6, 9 and 11 of the Consolidated Financial Statements included in this Annual Report.

Unincorporated Business Entities The Association had no unincorporated business entities at December 31, 2021.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Description of Property “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which appears in this Annual Report and is to be disclosed in this section, is incorporated herein by reference.

The following table sets forth certain information regarding the properties of the reporting entity, all of which are located in Florida: Form of Ownership Leased

Location 204 E. Orange Street* Lakeland

Description Administrative/ Branch

57 E. Third Street Apopka

Branch

Owned

2301 Thonotosassa Road Plant City

Branch

Owned

31050 Cortez Blvd. Brooksville

Branch

Owned

* The Administrative / branch office located at 204 E, Orange St. is leased through December 31, 2035.

20 2021 Annual Report

Farm Credit of Central Florida, ACA Senior Officers The following represents certain information regarding the senior officers of the Association and their business experience for the past five years: Senior Officer Reginald T. Holt, President & Chief Executive Officer

Time in Position 13 years

Prior Experience Sr. VP & Director of Agribusiness Lending from October 1997 to April 2008. Area VP from June 1992 to October 1997. Serves on the Executive Committee of the AgFirst/Farm Credit Bank of Texas Benefits Plan Sponsor Committee, and is the Vice Chair of the AgFirst Farm Credit Bank Benefits Plan Sponsor Committee.

D. Scott Fontenot, Executive Vice President & Chief Operating Officer

5 years

Association CFO from June 2009 until September 2016. Association Director of Risk Management from March 2009 to June 2009. EVP & CFO of Jack M. Berry, Inc. from 2005 to 2009. CFO of Farm Credit of Southwest Florida from 2000 to 2004.

Anne M. Sullivan, Sr. Vice President / Corporate Treasurer, Chief Financial Officer

5 years

Association Controller from June 2011 until September 2016. Director of Accounting with Century Residential, LLC from June 2009 until June 2011. Senior Accountant with the NCT Group from September 2006 until June 2009.

A. Dawn Tuten Sr. Vice President/Corporate Secretary, Chief Administrative Officer

2 years

Association Corporate Secretary and Director of Corporate Services 2017-2019. Association Corporate Secretary and HR Manager 2012-2017. Association Paralegal from 2005 to 2011. Paralegal with Publix Super Markets 1997 to 2005.

Jeffrey T. Phillips Sr. Vice President/Chief Lending Officer

1 year

Association Chief Relationship Manager from April 2007 to October 2020.

Johan S. Dam Sr. Vice President/Chief Marketing & Risk Officer

1 year

Association Chief Digital Strategist and Marketing Officer 2019-2020. Association Capital Markets and Investment Officer 2018-2019. Principal with Prudential Ag Investments 2015 to 2018. Association Chief Relationship Manager 2007 to 2015. Commercial Relationship Manager with SunTrust Bank 1997 to 2007.

Kerri Y. Kilby Vice President/Chief Credit Officer

3 months

Association Credit Analyst Manager from August 2017 until September 2021. Vice President Commercial Account Manager with TD Bank, NA from May 2012 to August 2017. Vice President Commercial Portfolio Loan Officer with TD Bank, NA from October 2010 to May 2012.

The total amount of compensation earned by the CEO and the highest paid officers as a group during the years ended December 31, 2021, 2020 and 2019 is as follows: Name of Individual or Number in Group Reginald T. Holt Reginald T. Holt Reginald T. Holt

Year 2021 2020 2019

8 6 7

2021 2020 2019

$ $ $

Salary 410,141 $ 390,616 $ 372,014 $

Bonus 163,933 $ 155,895 $ 130,279 $

$ $ $

1,454,741 $ 1,169,333 $ 1,143,706 $

469,906 $ 346,065 $ 346,683 $

Deferred Comp.

Change in Pension Value – $ (1,751) $ – $ 426,305 $ – $ 572,128 $ – $ – $ – $

127,803 417,969** 444,978

$ $ $

Perq/ Other* – $ – $ – $

Total 575,825 972,816 1,074,421

– $ – $ – $

2,052,450 1,933,367 1,935,367

* Amounts in the above table classified as Perquisites include travel incentives, group life insurance, automobile compensation, purchased automobile, spousal travel, relocation and tuition reimbursement, if the annual aggregate value of such Perquisites is more than $5,000. **This is a correction to an incorrect amount from previous year. The prior year reported $917,969 as opposed to $417,969. The total compensation was correct as reported.

Loan Officer Pool; 3) Credit Analysts Pool; and 4) Manager Pool.

Disclosure of information on the total compensation paid during 2021 to any senior officer or to any other employee included in the aggregate group total as reported in the above is available and will be disclosed to the shareholders of the institution upon request.

The General Pool covers all employees that are not included in any of the other defined pools. The payout of the pool is based on the Association meeting and exceeding certain objectives for Earnings and Liquidity (weighted at 50%), Asset Quality and Credit Administration (weighted at 25%), and Lending and Growth (weighted at 25%). Payments are calculated at yearend based on the weighted average performance in each category, paid 100 percent in cash. The General Pool contains five different payout levels. Level 1 contains all non-exempt employees (for wage and salary administration purposes) and the maximum award at this level shall not exceed 5% of their annual earned salary. Level 2 contains non-exempt employees of the Pre-Close Team, the Doc-Prep Team and the Post-Cost Team and the maximum award for this level shall not exceed 7.5% of the annual earned salary. Level 3 contains exempt

In addition to base salary, all Association employees (except the Director of Internal Audit and internal audit and review staff who may earn additional compensation under the Auditor Incentive Plan) may earn additional compensation under a corporate bonus plan (Plan). The Plan is designed to encourage participants to achieve the objectives of the Association by providing incentives to those employees who attain and sustain consistently high levels of performance, which contribute to the overall success and profitability of the Association. The Plan is designed to support the ACA’s organizational vision, long-range and annual strategic plans. The Plan consists of the following pools; 1) General Pool; 2)

21 2021 Annual Report

Farm Credit of Central Florida, ACA performance rating as determined by their respective employee evaluations. The Director of Internal Audit’s evaluation is conducted by the audit committee and reviewed by the board. The audit staff’s evaluation is conducted by the Director of Internal Audit and reviewed by the audit committee. While the award is based on the employee’s performance the final payout is made at the discretion of the board of directors.

employees (except CEO, Senior Officers, Director of Internal Audit, and employees identified in other defined pools) and the maximum award at this level shall not exceed 12% of their annual earned salary. Level 4 contains Senior Officers (except CEO, Director of Internal Audit, and employees identified in other defined pools) and the maximum award at this level shall not exceed 25% of their annual earned salary. Level 5 contains the CEO only and the maximum award at this level shall not exceed 40% of the annual earned salary. Each of the levels requires a certain minimum individual employee evaluation score. In addition, the General Pool limits the total of all payments within the pool to a maximum of 10 percent of the total net income.

Payment of the 2022 Corporate Bonus is in the first quarter of 2022. Bonuses are shown in the year earned, which may be different than the year of payment. In 2020, the CEO, Mr. Holt, and the Association entered into a change of control agreement that is effective for 5 years. Should a change of control occur, the Association will continue to employ Mr. Holt for a minimum of three years. Should his employment be terminated during the two years prior or the three years after the change of control or should any major changes to the employment conditions occur during the same time periods, Mr. Holt will be entitled to a severance package as outlined in the agreement.

The Loan Officer Pool covers lenders and the lending managers and is based upon the individual performance of each. Award percentage points are earned for Portfolio Management (weighted 65%) and Loan Administration (weighted 35%) standards based upon a points scoring matrix with performance areas weighted according to the individual’s standard of performance. Deductions to earned awards shall be made for the individual’s performance score in the area of Loan Administration (asset quality and delinquencies). Payments at this level are calculated at year-end based on the weighted average performance in each category and also require a certain minimum individual employee evaluation score. The maximum award at this level shall not exceed 50% of their annual earned salary for all employees who have executed a non-disclosure and non-solicitation agreement and 30% of their annual earned salary for all employees who have not executed a non-disclosure and non-solicitation agreement. All payments are paid 100% in cash.

The present value of pension benefits is the value at a specific date of the benefit payment stream an individual is expected to receive upon retirement based on pay and service earned to date. These present values change year over year as (1) pension benefits increase due to an additional year of pay and service being earned under the benefit formula, (2) individuals are one year older and one year closer to receiving payments, and (3) the assumptions used to determine the present value change. The present value of pension benefits will naturally increase as the benefits earned under the plan increase. Since the pension benefit formula is dependent on base pay, pay increases directly impact the pension values.

The Credit Analysts Pool covers credit analysts and is based upon the individual performance of each. Award percentage points are earned based on number of transactions activity with a payout % based on the individual’s standards of performance evaluation. Payments at this level are calculated at year-end based on the weighted average performance in each category and also require a certain minimum individual employee evaluation score. The maximum award at this level shall not exceed 18% of the annual earned salary for credit analysts. All payments are paid 100% in cash.

The present value is calculated by discounting each expected future benefit payment back to the determination date at a specified interest (or discount) rate. When a year passes, there is one less year of discounting, which increases the present value. For those already eligible for unreduced retirement (e.g. have 85 age + service points), this increase is offset by the decrease in early retirement subsidy value. The early retirement subsidy provided under the plan is most valuable when a participant first reaches eligibility for unreduced benefits. The value decreases every year thereafter until age 65.

The Managers Pool covers certain managers with individual performance goals (other managers without individual performance goals are in the General Pool) and is based upon the individual performance for each. Award percentage points are earned based on a payout % of the individual’s standards of performance evaluation. Payments at this level are calculated at year-end based on the weighted average performance in each category and also require a certain minimum individual employee evaluation score. The maximum award at this level shall not exceed 20% of their annual earned salary. All payments are paid 100% in cash.

Finally, the present value of the expected future benefit payment stream is based on actuarial assumptions, chiefly the discount rate mentioned above. Other assumptions are also used, such as expected retirement age and life expectancy. Changes in the actuarial assumptions can increase or decrease the pension values. The discount rate is updated every year based on the interest rate environment at December 31. A decrease in the discount rate (i.e. less discounting) increases the present values and vice versa. There was an increase in the discount rate assumption from December 31, 2020 to December 31, 2021, which decreased the pension values.

The Director of Internal Audit and internal audit and review staff may earn additional compensation under the Auditor Incentive Plan. The purpose of the plan is to encourage participants to achieve the long-term objectives of the Association by providing incentives to eligible audit staff that attain and sustain consistently high levels of performance, which contribute to the safety and soundness of the Association. The pay-out of the plan is based on the audit employee’s

Other actuarial assumptions are updated periodically. At December 31, 2021, the mortality improvement assumptions were updated to reflect recent mortality studies. These changes resulted in a minor increase in Retirement Plan present values.

22 2021 Annual Report

Farm Credit of Central Florida, ACA Pension Benefits Table As of December 31, 2021

Name of Individual or Number in Group CEO: Reginald T. Holt Reginald T. Holt Senior Officers and Highly Compensated Employees: 8 Officers, excluding the CEO

Number of Years Credited Service

Year

Plan Name

2021 2021

AgFirst Retirement Plan Supplemental Executive Retirement Plan

2021

42.00 42.00

AgFirst Retirement Plan

Actuarial Present Value of Accumulated Benefits $

15.84*

Payments During 2021

3,523,468 1,242,625 4,766,093

$ $

– – –

$ $

3,468,571 3,468,571

$ $

– –

* Represents the average years of credited service for the group

As a non-qualified plan, assets have been allocated and separately invested for this plan, but are not isolated from the general creditors of the Association. Additionally, all employees are reimbursed for all direct travel expenses incurred when traveling on Association business. A copy of the travel policy is available to shareholders upon written request.

Mr. Holt participates in the AgFirst Farm Credit Bank Supplemental Retirement Plan, a nonqualified supplemental executive retirement plan. Benefits that would have accrued in the qualified defined benefit retirement plan in the absence of Internal Revenue Code limitations are made up through the nonqualified supplemental executive retirement plan. At the election of the retiree, benefits are paid based upon various annuity terms. Directors

The following chart details the year the director began serving on the board, the current term of expiration, current committee assignments, number of meetings, other activities, compensation for Board meetings and other activities and total cash compensation paid:

Director Keith D. Mixon

Position

Term in Office Election or Current Appointment Term Year Expiration

Number of Days Served Board Meetings

Other Official Activities*

2012

2023

Randy L. Larson (3)

Chair Vice-Chair/ Outside Director

2017

2023

Daniel T. Aprile

Director

2019

2022

Robert M. Behr

Director

2019

Jenny R. Black (2)

Director

C. Dennis Carlton, Sr.

Compensation Total Paid During 2021 $

Committee Assignments^

30,333

Audit, Governance

30,000

28,000

Compensation, Governance Compensation, Risk Management

28,000

Audit, Compensation

2014

2024

30,000

Director

2004

2022

28,000

Governance, Risk Management Risk Management, Compensation

W. Rex Clonts, Jr.

Director

1997

2024

32,667

Audit, Governance

Reed C. Fischbach

Director

2020

2023

28,000

Audit, Risk Management

William L. Klinger

Director

2019

2022

28,000

Audit, Governance

David A. Mereness (1)

Outside Director

2016

2022

33,000

Randall E. Strode (4)

Director

2016

2023

Audit, Risk Management Risk Management, Compensation

* Includes board committee meetings and other board activities other than regular board meetings. **Robert M. Behr resigned from the Board on December 17, 2021. (1) (2) (3) (4)

Chair of the Audit Committee Chair of the Governance Committee Chair of the Compensation Committee Chair of the Risk Management Committee

23 2021 Annual Report

30,000 326,000

Farm Credit of Central Florida, ACA Subject to approval by the board, the Association may allow directors an annual retainer of $28,000 to be paid monthly. The chairs of the Compensation, Governance and Risk Management committees also receive $2,000. The chair of the audit committee receives $5,000, and the chair of the Board receives $7,000. All additional compensation amounts are annual stipends, paid monthly. Total compensation paid to directors as a group was $326,000 for 2021. No director received more than $5,000 in non-cash compensation during the year.

Information Technology field and her primary employment since 2008 has been managing her own IT consulting practice. Jenny Black Consulting, LLC serves clients in the transportation and agriculture industries. Mrs. Black was elected to the AgFirst Farm Credit Bank Board in August 2018 and is a director of the Farm Credit Council, a trade organization. Mrs. Black also serves on the Polk County 4-H Foundation Board, the Advisory Board for Volunteers in Service to the Elderly (VISTE), and the Board of Trustees at All Saints Academy.

Directors are reimbursed on an actual cost basis for all expenses incurred in the performance of official duties. Such expenses may include transportation, lodging, meals, tips, tolls, parking of cars, laundry, registration fees, and other expenses associated with travel on official business. A copy of the policy is available to shareholders of the Association upon request.

C. Dennis Carlton, Sr. is a cattleman, real estate investor and real estate broker and serves on the Agricultural Economic Development Council of Hillsborough County. His principal occupation and employment for the past 5 years was selfemployed rancher. W. Rex Clonts, Jr, is a citrus and vegetable grower and serves on the board of Citizens Bank of Florida. He is also past President of Seminole County Farm Bureau 2013 - 2015, 201920. Mr. Clonts is also Director Emeritus of the Florida Fruit and Vegetable Association. His principal occupation and employment for the past 5 years was with Clonts Groves, Inc.

The aggregate amount of reimbursement for travel, subsistence and other related expenses for all directors as a group was $33,210 for 2021, $32,965 for 2020 and $61,890 for 2019. The following represents certain information regarding the directors of the Association, including their principal occupation and employment for the past five years. Unless specifically listed, the principal occupation of the board member for the past five years has been as a self-employed farmer.

Reed C. Fischbach is a real estate broker specializing in sales, development and management of agricultural land. Mr. Fischbach serves on the Brandon Regional Hospital Board of Trustees. His principal occupation and employment for the past 5 years was with Fischbach Land Company.

Keith D. Mixon, Chair, is a citrus grower and past Chair of the board of the Florida Fruit and Vegetable Association. He and his family owned and operated SunnyRidge Farms prior to being sold to Dole Food Company, he then served as President of Dole Berry Company. Mr. Mixon serves as the Association’s representative on the AgFirst Nominating Committee. His principal occupation and employment for the past 5 years was self-employed farmer.

William L. Klinger was elected to the Board in April 2019. Mr. Klinger is the Treasurer of Lake Brantley Nurseries, Inc., an ornamental horticulture nursery with over 240 acres across multiple locations in two states and headquartered in Center Hill Florida. Mr. Klinger is the past State President of the Florida Nursery, Growers and Landscape Association. His principal occupation and employment for the past 35 years has been with Lake Brantley Nurseries.

Randy L. Larson, Vice-Chair, was appointed to the Board in December 2016 as the Association’s second Outside Director. He is a licensed professional engineer, a registered general contractor in Florida. His principal occupation and employment for the past 6 years was with R Larson Company.

David A. Mereness was appointed to the Board in March 2016 as the Association’s Outside Director. Mr. Mereness is a Partner of Dearolf & Mereness LLP, a member of the American Institute of Certified Public Accountants, the Florida Institute of Certificated Public Accounts and on the board of the National Society of Accountants for Cooperatives. His principal occupation and employment for the past 5 years was with Dearolf & Mereness LLP.

Daniel T. Aprile was elected to the Board in April 2019. Mr. Aprile is the Manager of Golden A Cattle Company, LLC and Aprile Farms, Inc. located in Tampa. Mr. Aprile is a member of the Hillsborough County Independent Oversight Committee and on the Agriculture Economic Development Council of Hillsborough County. He is also a past president of the Hillsborough County Farm Bureau. His principal occupation and employment for the past five years was with Golden A Cattle Company, LLC and Aprile Farms, Inc.

Randall E. Strode was elected to the Board in April 2016. Mr. Strode is the Founder and Vice President of AgriStarts, Inc. a cloning tissue culture operation in Apopka, FL. His principal occupation and employment for the past 38 years was with AgriStarts, Inc.

Robert M. Behr was elected to the Board in April 2019. Dr. Behr is the CEO of Citrus World, Inc. and its subsidiaries, a citrus growing, processing and marketing organization. Dr. Behr is also a member of the CoBank board of directors. His principal occupation and employment for the past five years has been as the CEO of Citrus World, Inc. and its subsidiaries. Dr. Behr resigned from the Board effective December 17, 2021.

Transactions with Senior Officers and Directors The reporting entity’s policies on loans to and transactions with its officers and directors, to be disclosed in this section are incorporated herein by reference to Note 10, Related Party Transactions, of the Consolidated Financial Statements included in this Annual Report. There have been no transactions between the Association and senior officers or directors which require reporting per FCA regulations.

Jenny R. Black has served on the Board since 2014. Mrs. Black is a partner in multiple citrus growing operations and is a member of Peace River Packing, a citrus growing cooperative. Mrs. Black has more than 20 years of experience in the

24 2021 Annual Report

Farm Credit of Central Florida, ACA protections afforded them through FCA regulations and Farm Credit System institution efforts.

Involvement in Certain Legal Proceedings There were no matters which came to the attention of management or the board of directors regarding involvement of current directors or senior officers in specified legal proceedings which should be disclosed in this section. No directors or senior officers have been involved in any legal proceedings during the last five years which require reporting per FCA regulations.

Credit and Services to Young, Beginning, and Small Farmers and Ranchers and Producers or Harvesters of Aquatic Products Information to be disclosed in this section is incorporated herein by reference to the similarly named section in the Management's Discussion and Analysis of Financial Condition and Results of Operations section included in this Annual Report to the shareholders.

Relationship with Independent Auditors There were no changes in or material disagreements with our Independent Auditors on any matter of accounting principles or financial statement disclosure during this period.

Shareholder Investment Shareholder investment in the Association could be materially affected by the financial condition and results of operations of AgFirst Farm Credit Bank (Bank or AgFirst). Copies of the Bank’s Annual and Quarterly reports are available upon request free of charge by calling 1-800-845-1745, ext. 2764, or writing Matthew Miller, AgFirst Farm Credit Bank, P. O. Box 1499, Columbia, SC 29202. Information concerning AgFirst Farm Credit Bank can also be obtained by going to AgFirst’s web site at www.agfirst.com. The Bank prepares an electronic version of the Annual Report, which is available on the website, within 75 days after the end of the fiscal year. The Bank prepares an electronic version of the Quarterly report within 40 days after the end of each fiscal quarter, except that no report needs to be prepared for the fiscal quarter that coincides with the end of the fiscal year of the Bank.

Aggregate fees for services rendered by its Independent Auditor for the year ended December 31, 2021 were as follows: 2021 Independent Auditor PricewaterhouseCoopers LLP Audit services Total

$ $

82,465 82,465

PricewaterhouseCoopers audit fees were for the annual audit of and for rendering an opinion on the Association’s Consolidated Financial Statements. Consolidated Financial Statements The Consolidated Financial Statements, together with the report thereon of PricewaterhouseCoopers LLP dated March 10, 2022 and the report of management, which appear in this Annual Report, are incorporated herein by reference. Copies of the Association’s Annual and unaudited Quarterly reports are available upon request free of charge by calling 1800-533-2773 or writing Anne M. Sullivan, Chief Financial Officer, Farm Credit of Central Florida, ACA, P.O. Box 8009, Lakeland, FL 33802 or accessing the web site, www.farmcreditcfl.com. The Association prepares an electronic version of the Annual Report which is available on the Association’s web site within 75 days after the end of the fiscal year and distributes the Annual Reports to shareholders within 90 days after the end of the fiscal year. The Association prepares an electronic version of the Quarterly report within 40 days after the end of each fiscal quarter, except that no report need be prepared for the fiscal quarter that coincides with the end of the fiscal year of the institution. Borrower Information Regulations Since 1972, Farm Credit Administration (FCA) regulations have required that borrower information be held in strict confidence by Farm Credit System (FCS) institutions, their directors, officers and employees. These regulations provide Farm Credit institutions clear guidelines for protecting their borrowers’ nonpublic personal information. On November 10, 1999, the FCA Board adopted a policy that requires FCS institutions to formally inform new borrowers at loan closing of the FCA regulations on releasing borrower information and to address this information in the Annual Report. The implementation of these measures ensures that new and existing borrowers are aware of the privacy

25 2021 Annual Report

Farm Credit of Central Florida, ACA

Report of the Audit Committee The Audit Committee of the Board of Directors (Committee) is comprised of the directors named below. None of the directors who serve on the Committee is an employee of Farm Credit of Central Florida, ACA and in the opinion of the Board of Directors, each is free of any relationship with the Association or management that would interfere with the director’s independent judgment on the Committee. The Committee has adopted a written charter that has been approved by the Board of Directors. The Committee has reviewed and discussed the Association’s audited financial statements with management, which has primary responsibility for the financial statements. PricewaterhouseCoopers LLP (PwC), the Association’s Independent Auditor for 2021, is responsible for expressing an opinion on the conformity of the Association’s audited financial statements with accounting principles generally accepted in the United States of America. The Committee has discussed with PwC the matters that are required to be discussed by Statement on Auditing Standards No. 114 (The Auditor's Communication With Those Charged With Governance). The Committee discussed with PwC its independence from Farm Credit of Central Florida, ACA. The Committee also reviewed the non-audit services provided by PwC and concluded that these services were not incompatible with maintaining PwC’s independence. The Committee has also concluded that PwC’s provision of non-audit services, if any, to the Association is compatible with PwC’s independence. Based on the considerations referred to above, the Committee recommended to the Board of Directors that the audited financial statements be included in the Association’s Annual Report for 2021. The foregoing report is provided by the following independent directors, who constitute the Committee:

David A. Mereness Chair of the Audit Committee Members of Audit Committee Robert M. Behr, Vice Chair W. Rex Clonts, Jr. William L. Klinger Keith D. Mixon Ronald R. Wetherington

March 10, 2022

26 2021 Annual Report

Report of Independent Auditors To the Board of Directors and Management of Farm Credit of CentralFlorida, ACA Opinion We have audited the accompanying consolidated financial statements of Farm Credit of Central Florida, ACA and its subsidiaries (the “Association”), which comprise the consolidated balance sheets as of December 31, 2021, 2020 and 2019, and the related consolidated statements of comprehensive income, of changes in members'equity and of cash flows for the years then ended, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the accompanying consolidated financialstatements present fairly, in all material respects, the financialposition of the Association as of December 31, 2021, 2020 and 2019, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Basis for Opinion We conducted our audit in accordance with auditing standards generally accepted in the United States of America (US GAAS). Our responsibilities under those standards are further described in the Auditors’Responsibilities for the Audit of the Consolidated FinancialStatements section of our report. We are required to be independent of the Association and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Responsibilitiesof Management for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financialstatements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financialstatements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantialdoubt about the Association’s ability to continue as a going concern for one year after the date the consolidated financial statements are available to be issued. Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from materialmisstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with US GAAS will always detect a materialmisstatement when it exists. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered materialif there is a substantial

PricewaterhouseCoopers LLP, 1075 Peachtree Street NE, Suite 2600, Atlanta, GA 30309 T: (678) 419 1000, F: (678) 419 1239, www.pwc.com/us

pwc likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the consolidated financial statements. In performing an audit in accordance with US GAAS, we: ● ●

●

● ●

Exercise professional judgment and maintain professional skepticism throughout the audit. Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Obtain an understanding of internalcontrol relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Association's internal control. Accordingly, no such opinion is expressed. Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the consolidated financial statements. Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantialdoubt about the Association’s ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit. Other Information Management is responsible for the other information included in the annual report. The other information comprises the information included in the 2021 Annual Report, but does not include the consolidated financial statements and our auditors’ report thereon. Our opinion on the consolidated financialstatements does not cover the other information, and we do not express an opinion or any form of assurance thereon. In connection with our audit of the consolidated financialstatements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the consolidated financialstatements or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected materialmisstatement of the other information exists, we are required to describe it in our report.

Atlanta, Georgia March 10, 2022

Farm Credit Of Central Florida, ACA

Consolidated Balance Sheets December 31, 2020

2021

(dollars in thousands)

Assets Cash

Investments in debt securities: Held to maturity (fair value of $2,720, $3,924, and $5,205, respectively)

Net loans Accrued interest receivable Equity investments in other Farm Credit institutions Premises and equipment, net Other property owned Accounts receivable Other assets

Liabilities Notes payable to AgFirst Farm Credit Bank Accrued interest payable Patronage refunds payable Accounts payable Other liabilities

2,748

Loans Allowance for loan losses

Total assets

2019

3,966

14 5,262

757,407 (3,067)

658,098 (3,283)

568,435 (3,113)

754,340

654,815

565,322

2,877 6,755 4,801 — 13,760 4,847

2,671 6,636 4,936 227 11,030 5,032

2,394 6,677 2,583 — 6,984 1,188

790,139

689,325

590,424

635,922 1,117 11,761 1,469 12,562

548,714 950 9,757 793 10,418

463,711 1,197 6,691 653 4,725

Total liabilities

662,831

570,632

476,977

1,149

1,008

942

Commitments and contingencies (Note 11) Members' Equity Capital stock and participation certificates Retained earnings Allocated Unallocated Accumulated other comprehensive income (loss)

19,103 107,687 (631)

20,380 98,129 (824)

127,308

Total members' equity $

Total liabilities and members' equity

790,139

118,693 $

689,325

The accompanying notes are an integral part of these consolidated financial statements.

29 2021 Annual Report

21,637 91,532 (664) 113,447 $

590,424

Farm Credit Of Central Florida, ACA

Consolidated Statements of Comprehensive Income For the year ended December 31, 2021 2020 2019

(dollars in thousands)

Interest Income Loans Investments

Total interest income

28,104 58

27,069 104

28,798 187

28,162

27,173

28,985

Interest Expense Notes payable to AgFirst Farm Credit Bank

11,806

11,841

14,248

Net interest income Provision for (reversal of allowance for) loan losses

16,356 (340)

15,332 214

14,737 (424)

Net interest income after provision for (reversal of allowance for) loan losses

16,696

15,118

15,161

Noninterest Income Loan fees Fees for financially related services Patronage refunds from other Farm Credit institutions Gains (losses) on sales of rural home loans, net Gains (losses) on sales of premises and equipment, net Gains (losses) on other transactions Insurance Fund refunds Other noninterest income

860 2,628 13,573 337 57 85 — 7

1,108 1,506 10,819 227 (69) 60 107 2

482 1,034 6,744 353 16 72 116 5

17,547

13,760

8,822

8,354 1,065 459 15 2,813

7,867 735 379 1 2,718

13,050

12,706

11,700

21,193 35

16,172 75

12,283 —

Total noninterest income Noninterest Expense Salaries and employee benefits Occupancy and equipment Insurance Fund premiums (Gains) losses on other property owned, net Other operating expenses

8,624 976 868 (158) 2,740

Total noninterest expense Income before income taxes Provision for income taxes Net income

Other comprehensive income net of tax Employee benefit plans adjustments

21,158

193

Comprehensive income

21,351

2021 Annual Report

(160) $

The accompanying notes are an integral part of these consolidated financial statements.

16,097

15,937

12,283

(203) $

12,080

Farm Credit Of Central Florida, ACA

Consolidated Statements of Changes in Members’ Equity Capital Stock and Participation Certificates

(dollars in thousands)

Balance at December 31, 2018 Cumulative effect of change in accounting principle Comprehensive income Capital stock/participation certificates issued/(retired), net Patronage distribution Cash Retained earnings retired

Balance at December 31, 2019

882

Allocated

22,907

$ 109,100

85,772

(461)

(203)

(6,500) (1,270)

(6,500) (1,270) 942

21,637

91,532

16,097

(664)

$ 113,447

(160)

15,937 66

(9,500) (1,257)

(9,500) (1,257) $

1,008

20,380

98,129

21,158

(824) 193

(11,600)

19,103

107,687

The accompanying notes are an integral part of these consolidated financial statements.

31 2021 Annual Report

21,351

(11,600) (1,277)

(1,277) 1,149

$ 118,693

141

(23) 12,080 60

Comprehensive income Capital stock/participation certificates issued/(retired), net Patronage distribution Cash Retained earnings retired Balance at December 31, 2021

Total Members' Equity

(23) 12,283

Comprehensive income Capital stock/participation certificates issued/(retired), net Patronage distribution Cash Retained earnings retired Balance at December 31, 2020

Unallocated

Accumulated Other Comprehensive Income (Loss)

Retained Earnings

(631)

$ 127,308

Farm Credit Of Central Florida, ACA

Consolidated Statements of Cash Flows (dollars in thousands) Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation on premises and equipment Amortization (accretion) of net deferred loan costs (fees) Premium amortization (discount accretion) on investments in debt securities Provision for (reversal of allowance for) loan losses (Gains) losses on other property owned (Gains) losses on sales of premises and equipment, net (Gains) losses on sales of rural home loans, net (Gains) losses on other transactions Changes in operating assets and liabilities: Origination of loans held for sale Proceeds from sales of loans held for sale, net (Increase) decrease in accrued interest receivable (Increase) decrease in accounts receivable (Increase) decrease in other assets Increase (decrease) in accrued interest payable Increase (decrease) in accounts payable Increase (decrease) in other liabilities Total adjustments Net cash provided by (used in) operating activities Cash flows from investing activities: Proceeds from maturities of or principal payments received on investments in debt securities, held to maturity Net (increase) decrease in loans (Increase) decrease in equity investments in other Farm Credit institutions Purchases of premises and equipment Proceeds from sales of premises and equipment Proceeds from sales of other property owned Net cash provided by (used in) investing activities Cash flows from financing activities: Advances on (repayment of) notes payable to AgFirst Farm Credit Bank, net Capital stock and participation certificates issued/(retired), net Patronage refunds and dividends paid Retained earnings retired Net cash provided by (used in) financing activities Net increase (decrease) in cash Cash, beginning of period Cash, end of period

For the year ended December 31, 2021 2020 2019 $

21,158

16,097

12,283

411 (124) 57 (340) (169) (57) (337) (85)

229 (80) 74 214 — 69 (227) (60)

219 (129) 165 (424) (1) (16) (353) (72)

(13,407) 13,744 (206) (2,730) 185 167 676 2,422 207 21,365

(12,495) 12,722 (277) (4,046) (3,844) (247) 140 5,593 (2,235) 13,862

(16,932) 17,285 18 1,071 (476) (46) (868) 2,108 1,549 13,832

1,161 (99,063) (119) (276) 57 398 (97,842)

1,222 (89,854) 41 (2,651) — — (91,242)

2,486 (29,072) (109) (1,062) 23 33 (27,701)

87,208 141 (9,596) (1,277) 76,476 (1) 12 11

85,003 66 (6,434) (1,257) 77,378 (2) 14 12

21,065 60 (6,161) (1,270) 13,694 (175) 189 14

Supplemental schedule of non-cash activities: Receipt of property in settlement of loans Estimated cash dividends or patronage distributions declared or payable Employee benefit plans adjustments (Note 9)

2 11,600 (193)

227 9,500 160

32 6,500 203

Supplemental information: Interest paid Taxes (refunded) paid, net

11,639 34

12,088 77

14,294 —

The accompanying notes are an integral part of these consolidated financial statements.

32 2021 Annual Report

Farm Credit of Central Florida, ACA

Notes to the Consolidated Financial Statements (dollars in thousands, except as noted) value, and (3) for other specified purposes. The Insurance Fund is also available for discretionary uses by the Insurance Corporation to provide assistance to certain troubled System institutions and to cover the operating expenses of the Insurance Corporation. Each System bank has been required to pay premiums, which may be passed on to the Association, into the Insurance Fund, based on its average adjusted outstanding Insured Debt until the assets in the Insurance Fund reach the “secure base amount.” The secure base amount is defined in the Farm Credit Act as 2.0 percent of the aggregate insured obligations (adjusted to reflect the reduced risk on loans or investments guaranteed by federal or state governments) or such other percentage of the aggregate obligations as the Insurance Corporation at its sole discretion determines to be actuarially sound. When the amount in the Insurance Fund exceeds the secure base amount, the Insurance Corporation is required to reduce premiums and may return excess funds above the secure base amount to System institutions. However, it must still ensure that reduced premiums are sufficient to maintain the level of the Insurance Fund at the secure base amount.

Note 1 — Organization and Operations A. Organization: Farm Credit of Central Florida, ACA (the Association or ACA) is a member-owned cooperative that provides credit and credit-related services to qualified borrowers in the counties of Brevard, Citrus, Hernando, Hillsborough, Lake, Orange, Osceola, Pasco, Pinellas, Polk, Seminole, Sumter, and Volusia in the state of Florida. The Association is a lending institution in the Farm Credit System (System), a nationwide network of cooperatively owned banks and associations. It was established by Acts of Congress and is subject to the provisions of the Farm Credit Act of 1971, as amended (Farm Credit Act). The System specializes in providing financing and related services to qualified borrowers for agricultural and rural purposes. The nation is served by three Farm Credit Banks (FCBs) and one Agricultural Credit Bank (ACB), (collectively, the System Banks) each of which has specific lending authorities within its chartered territory. The ACB also has additional specific nationwide lending authorities.

B. Operations: The Farm Credit Act sets forth the types of authorized lending activity and financial services that can be offered by the Association, and the persons eligible to borrow.

Each System Bank serves one or more Agricultural Credit Associations (ACAs) that originate long-term, short-term and intermediate-term loans, Production Credit Associations (PCAs) that originate and service short- and intermediate-term loans, and/or Federal Land Credit Associations (FLCAs) that originate and service long-term real estate mortgage loans. These associations borrow a majority of the funds for their lending activities from their related bank. System Banks are also responsible for supervising the activities of associations within their districts. AgFirst (Bank) and its related associations (Associations or District Associations) are collectively referred to as the AgFirst District. The District Associations jointly own substantially all of AgFirst’s voting stock. As of year-end, the District consisted of the Bank and nineteen District Associations. All nineteen were structured as ACA holding companies, with PCA and FLCA subsidiaries. FLCAs are tax-exempt while ACAs and PCAs are taxable.

The Associations borrow from the Bank and in turn may originate and service short- and intermediate-term loans to their members, as well as long-term real estate mortgage loans. The Bank primarily lends to the District Associations in the form of a line of credit to fund the Associations’ earning assets. These lines of credit (or Direct Notes) are collateralized by a pledge of substantially all of each Association’s assets. The terms of the Direct Notes are governed by a General Financing Agreement (GFA) between the Bank and Association. Each advance is structured such that the principal cash flow, repricing characteristics, and underlying index (if any) of the advance match those of the assets being funded. By match-funding the Association loans, the Associations’ exposure to interest rate risk is minimized.

The Farm Credit Administration (FCA) is delegated authority by Congress to regulate the System banks and associations. The FCA examines the activities of the associations and certain actions by the associations are subject to the prior approval of the FCA and the supervising bank.

In addition to providing funding for earning assets, the Bank provides District Associations with banking and support services such as accounting, human resources, information systems, and marketing. The costs of these support services are included in the cost of the Direct Note, or in some cases billed directly to certain Associations that use a specific service. The Association is authorized to provide, either directly or in participation with other lenders, credit, credit commitments, and related services to eligible borrowers. Eligible borrowers include farmers, ranchers, producers or harvesters of aquatic products, rural residents, and farmrelated businesses.

The Farm Credit Act also established the Farm Credit System Insurance Corporation (Insurance Corporation) to administer the Farm Credit Insurance Fund (Insurance Fund). The Insurance Fund is required to be used (1) to ensure the timely payment of principal and interest on Systemwide debt obligations (Insured Debt), (2) to ensure the retirement of protected borrower capital at par or stated

33 2021 Annual Report

Farm Credit of Central Florida, ACA remains contractually past due until the entire amount past due, including principal, accrued interest, and penalty interest incurred as the result of past due status, is collected or otherwise discharged in full. A formal restructuring may also cure a past due status.

The Association may sell to any System borrowing member, on an optional basis, credit or term life insurance appropriate to protect the loan commitment in the event of death of the debtor(s). The sale of other insurance necessary to protect a member’s farm or aquatic unit is permitted, but limited to hail and multi-peril crop insurance, and insurance necessary to protect the facilities and equipment of aquatic borrowers.

Loans are generally classified as nonaccrual when principal or interest is delinquent for 90 days (unless adequately collateralized and in the process of collection) or circumstances indicate that collection of principal and/or interest is in doubt. When a loan is placed in nonaccrual status, accrued interest deemed uncollectible is reversed (if accrued in the current year) or charged against the allowance for loan losses (if accrued in the prior year).

Note 2 — Summary of Significant Accounting Policies The accounting and reporting policies of the Association conform with accounting principles generally accepted in the United States of America (GAAP) and prevailing practices within the banking industry. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Significant estimates are discussed in these footnotes, as applicable. Actual results may differ from these estimates.

When loans are in nonaccrual status, payments are applied against the recorded investment in the loan asset. If collection of the recorded investment in the loan is fully expected and the loan does not have a remaining unrecovered prior charge-off associated with it, the interest portion of payments received in cash may be recognized as interest income. Nonaccrual loans may be returned to accrual status when principal and interest are current, prior charge-offs have been recovered, the ability of the borrower to fulfill the contractual repayment terms is fully expected, and the loan is not classified “doubtful” or “loss.” Loans are charged off at the time they are determined to be uncollectible.

The accompanying consolidated financial statements include the accounts of the ACA, PCA and FLCA. Certain amounts in the prior year financial statements may have been reclassified to conform to the current period presentation. Such reclassifications had no effect on net income or total members’ equity of prior years.

In cases where the Association makes certain monetary concessions to the borrower through modifications to the contractual terms of the loan, the loan is classified as a restructured loan. A restructured loan constitutes a troubled debt restructuring (TDR) if for economic or legal reasons related to the debtor’s financial difficulties the Association grants a concession to the debtor that it would not otherwise consider. If the borrower’s ability to meet the revised payment schedule is uncertain, the loan is classified as a nonaccrual loan.

A. Cash: Cash represents cash on hand and on deposit at banks. At the most recent year-end, the Association held no cash in excess of insured amounts. B. Loans and Allowance for Loan Losses: The Association is authorized to make long-term real estate loans with maturities of 5 to 40 years and certain short- and intermediate-term loans for agricultural production or operating purposes with maturities of not more than 10 years.

The allowance for loan losses is maintained at a level considered adequate by management to provide for probable and estimable losses inherent in the loan portfolio as of the report date. The allowance for loan losses is increased through provisions for loan losses and loan recoveries and is decreased through loan charge-offs and allowance reversals. A review of individual loans in each respective portfolio is performed periodically to determine the appropriateness of risk ratings and to ensure loss exposure to the Association has been identified. The allowance for loan losses is a valuation account used to reasonably estimate loan losses as of the financial statement date. Determining the appropriate allowance for loan losses balance involves significant judgment about when a loss has been incurred and the amount of that loss. The Association considers the following factors, among others, when determining the allowance for loan losses:

Loans are carried at their principal amount outstanding adjusted for charge-offs, premiums, discounts, deferred loan fees or costs, and derivative instruments and hedging valuation adjustments, if any. Interest on loans is accrued and credited to interest income based upon the daily principal amount outstanding. The difference in the total investment in a loan and its principal amount may be deferred as part of the carrying amount of the loan and the net difference amortized over the life of the related loan as an adjustment to interest income using the effective interest method. Impaired loans are loans for which it is probable that all principal and interest will not be collected according to the contractual terms of the loan and are generally considered substandard or doubtful, which is in accordance with the loan rating model, as described below. Impaired loans include nonaccrual loans, restructured loans, and loans past due 90 days or more and still accruing interest. A loan is considered contractually past due when any principal repayment or interest payment required by the loan instrument is not received on or before the due date. A loan

    

34 2021 Annual Report

Changes in credit risk classifications Changes in collateral values Changes in risk concentrations Changes in weather-related conditions Changes in economic conditions

Farm Credit of Central Florida, ACA value of the collateral received is charged to the allowance for loan losses. Revised estimates to the fair value less cost to sell are reported as adjustments to the carrying amount of the asset, provided that such adjusted value is not in excess of the carrying amount at acquisition. Income, expenses, and carrying value adjustments related to other property owned are included in Gains (Losses) on Other Property Owned, Net in the Consolidated Statements of Comprehensive Income.

A specific allowance may be established for impaired loans under Financial Accounting Standards Board (FASB) guidance on accounting by creditors for impairment of a loan. Impairment of these loans is measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate or, as practically expedient, at the loan’s observable market price or fair value of the collateral if the loan is collateral dependent. A general allowance may also be established under FASB guidance on accounting for contingencies, to reflect estimated probable credit losses inherent in the remainder of the loan portfolio which excludes impaired loans considered under the specific allowance discussed above. A general allowance can be evaluated on a pool basis for those loans with similar characteristics. The level of the general allowance may be based on management’s best estimate of the likelihood of default adjusted for other relevant factors reflecting the current environment.

E. Premises and Equipment: Land is carried at cost. Premises and equipment are carried at cost less accumulated depreciation. Depreciation is provided on the straight-line method over the estimated useful lives of the assets. Gains and losses on dispositions are reflected in current earnings. Maintenance and repairs are charged to expense and improvements are capitalized. Premises and equipment are evaluated for impairment whenever events or circumstances indicate that the carrying value of the asset may not be recoverable.

The credit risk rating methodology is a key component of the Association’s allowance for loan losses evaluation, and is generally incorporated into the institution’s loan underwriting standards and internal lending limit. The Association uses a two-dimensional loan rating model based on internally generated combined system risk rating guidance that incorporates a 14-point risk rating scale to identify and track the probability of borrower default and a separate scale addressing loss given default over a period of time. Probability of default is the probability that a borrower will experience a default within 12 months from the date of the determination of the risk rating. A default is considered to have occurred if the lender believes the borrower will not be able to pay its obligation in full or the borrower is past due more than 90 days. The loss given default is management’s estimate as to the anticipated economic loss on a specific loan assuming default has occurred or is expected to occur within the next 12 months.

From time to time, assets classified as premises and equipment are transferred to held for sale for various reasons. These assets are carried in Other Assets at the lower of the recorded investment in the asset or fair value less estimated cost to sell based upon the property’s appraised value at the date of transfer. Any write-down of property held for sale is recorded as a loss in the period identified. F. Investments: The Association may hold investments as described below. Equity Investments in Other Farm Credit System Institutions Investments in other Farm Credit System institutions are generally nonmarketable investments consisting of stock and participation certificates, allocated surplus, and reciprocal investments in other institutions regulated by the FCA. These investments are carried at cost and evaluated for impairment based on the ultimate recoverability of the par value rather than by recognizing temporary declines in value.

Each of the ratings carries a distinct percentage of default probability. The 14-point risk rating scale provides for granularity of the probability of default, especially in the acceptable ratings. There are nine acceptable categories that range from a borrower of the highest quality to a borrower of minimally acceptable quality. The probability of default between 1 and 9 is very narrow and would reflect almost no default to a minimal default percentage. The probability of default grows significantly as a loan moves from a 9 to 10 (other assets especially mentioned) and grows more significantly as a loan moves to a substandard viable level of 11. A substandard non-viable rating of 12 indicates that the probability of default is almost certain. Loans risk rated 13 or 14 are generally written off.

Investments in Debt Securities The Association holds certain investment securities, as permitted under the FCA regulations. These investments are classified based on management’s intention on the date of purchase and are generally recorded in the Consolidated Balance Sheets as securities on the trade date. Securities for which the Association has the intent and ability to hold to maturity are classified as held-to-maturity (HTM) and carried at amortized cost. Investment securities classified as available-for-sale (AFS) are carried at fair value with net unrealized gains and losses included as a component of Other Comprehensive Income (OCI). Purchase premiums and discounts are amortized or accreted ratably over the term of the respective security using the interest method. The amortization of premiums on certain purchased callable debt securities that have explicit, noncontingent call features and that are callable at fixed prices on preset dates are amortized to the earliest call date.

C. Loans Held for Sale: Loans are classified as held for sale when there is intent to sell the loans within a reasonable period of time. Loans intended for sale are carried at the lower of cost or fair value. D. Other Property Owned (OPO): Other property owned, consisting of real estate, personal property, and other assets acquired through a collection action, is recorded upon acquisition at fair value less estimated selling costs. Any initial reduction in the carrying amount of a loan to the fair

35 2021 Annual Report

Farm Credit of Central Florida, ACA G. Voluntary Advance Conditional Payments: The Association is authorized under the Farm Credit Act to accept advance payments from borrowers. To the extent the borrower’s access to such advance payments is restricted, the advanced conditional payments are netted against the borrower’s related loan balance. Amounts in excess of the related loan balance and amounts to which the borrower has unrestricted access are presented as liabilities in the accompanying Consolidated Balance Sheets. Advanced conditional payments are not insured. Interest is generally paid by the Association on such accounts.

Other Equity Investments Any equity securities with a readily determinable fair value are carried at fair value with unrealized gains and losses included in earnings. Equity securities without a readily determinable fair value are carried at cost less any impairment. Other Investments As discussed in Note 8, certain investments, consisting primarily of mutual funds, are held in trust and investment accounts and are reported at fair value. Holding period gains and losses are included within Noninterest Income on the Consolidated Statements of Comprehensive Income and the balance of these investments is included in Other Assets on the accompanying Consolidated Balance Sheets.

H. Employee Benefit Plans: The Association participates in District and multi-district sponsored benefit plans. These plans may include defined benefit final average pay retirement, defined benefit cash balance retirement, defined benefit other postretirement benefits, and defined contribution plans.

Impairment The Association reviews all investments that are in a loss position in order to determine whether the unrealized loss, which is considered an impairment, is temporary or otherthan-temporary. As mentioned above, changes in the fair value of AFS investments are reflected in OCI, unless the investment is deemed to be other-than-temporarily impaired (OTTI). Impairment is considered to be otherthan-temporary if the present value of cash flows expected to be collected from the debt security is less than the amortized cost basis of the security (any such shortfall is referred to as a credit loss). If the Association intends to sell an impaired debt security or is more likely than not to be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, the impairment is other-than-temporary and recognized currently in earnings in an amount equal to the entire difference between fair value and amortized cost. If a credit loss exists, but the Association does not intend to sell the impaired debt security and is not more likely than not to be required to sell before recovery, the impairment is otherthan-temporary and is separated into (i) the estimated amount relating to credit loss, and (ii) the amount relating to all other factors. Only the estimated credit loss amount is charged to current earnings, with the remainder of the loss amount recognized in OCI.

Defined Contribution Plans Substantially all employees are eligible to participate in the defined contribution Farm Credit Benefit Alliance (FCBA) 401(k) Plan, subsequently referred to as the 401(k) Plan, which qualifies as a 401(k) plan as defined by the Internal Revenue Code. Employee deferrals are not to exceed the maximum deferral as determined and adjusted by the Internal Revenue Service. Company contributions to the 401(k) Plan are expensed as funded. The Association also offers a FCBA supplemental 401(k) plan for certain key employees. This plan is nonqualified. Company contributions are expensed as funded. Additional information may be found in Note 9. Multiemployer Defined Benefit Plans Substantially all employees hired before January 1, 2003 may participate in the AgFirst Farm Credit Retirement Plan (Plan), which is a defined benefit plan and considered multiemployer under FASB accounting guidance. The Plan is noncontributory and includes eligible Association and District employees. The “Projected Unit Credit” actuarial method is used for financial reporting purposes.

In subsequent periods, if the present value of cash flows expected to be collected is less than the amortized cost basis, the Association will record additional OTTI and adjust the yield of the security prospectively. The amount of total OTTI for an AFS security that previously was impaired is determined as the difference between its carrying amount prior to the determination of OTTI and its fair value.

In addition to pension benefits, the Association provides certain health care and life insurance benefits for retired employees (other postretirement benefits) through a multidistrict sponsored retiree healthcare plan. Substantially all employees are eligible for those benefits when they reach early retirement age while working for the Association. Authoritative accounting guidance requires the accrual of the expected cost of providing these benefits to employees, their beneficiaries and covered dependents during the years the employees render service necessary to become eligible for benefits.

Investment Income Interest on investment securities, including amortization of premiums and accretion of discounts, is included in Interest Income. Realized gains and losses from the sales of investment securities are recognized in current earnings using the specific identification method.

Since the foregoing plans are multiemployer, the Association does not apply the provisions of FASB guidance on employers’ accounting for defined benefit pension and other postretirement plans in its stand-alone financial statements. Rather, the effects of this guidance are reflected in the Annual Information Statement of the Farm Credit System.

Dividends from Investments in Other Farm Credit Institutions are generally recorded as patronage income and included in Noninterest Income.

36 2021 Annual Report

Farm Credit of Central Florida, ACA taxable earnings, including the effects of the expected patronage program, which reduces taxable earnings.

Additional information may be found in Note 9 and in the Notes to the Annual Information Statement of the Farm Credit System.

J. Due from AgFirst Farm Credit Bank: The Association records patronage refunds from the Bank and certain District Associations on an accrual basis.

Single Employer Defined Benefit Plan The Association also sponsors a single employer defined benefit supplemental retirement plan for certain key employees. This plan is nonqualified; therefore, the associated liabilities are included in the Association’s Consolidated Balance Sheets in Other Liabilities.

K. Valuation Methodologies: FASB guidance defines fair value as the exchange price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability. This guidance also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. It prescribes three levels of inputs that may be used to measure fair value.

The foregoing defined benefit plan is considered single employer, therefore the Association applies the provisions of FASB guidance on employers’ accounting for defined benefit pension and other postretirement plans in its standalone financial statements. See Note 9 for additional information. I. Income Taxes: The Association evaluates tax positions taken in previous and current years according to FASB guidance. A tax position can result in a permanent reduction of income taxes payable, a deferral of income taxes otherwise currently payable to future years, or a change in the expected realizability of deferred tax assets. The term tax position also encompasses, but is not limited to, an entity’s status, including its status as a pass-through entity or tax-exempt entity.

Level 1 inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets. Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets; quoted prices in markets that are not active; and inputs that are observable, or can be corroborated, for substantially the full term of the asset or liability.

The Association is generally subject to Federal and certain other income taxes. As previously described, the ACA holding company has two wholly-owned subsidiaries, a PCA and a FLCA. The FLCA subsidiary is exempt from federal and state income taxes as provided in the Farm Credit Act. The ACA holding company and the PCA subsidiary are subject to federal, state and certain other income taxes.

Level 3 inputs to the valuation methodology are unobservable and supported by little or no market activity. Valuation is determined using pricing models, discounted cash flow methodologies, or similar techniques, and could include significant management judgment or estimation. Level 3 assets and liabilities also could include instruments whose price has been adjusted based on dealer quoted pricing that is different than a third-party valuation or internal model pricing.

The Association is eligible to operate as a cooperative that qualifies for tax treatment under Subchapter T of the Internal Revenue Code. Accordingly, under specified conditions, the Association can exclude from taxable income amounts distributed as qualified patronage refunds in the form of cash, stock or allocated surplus. Provisions for income taxes are made only on those taxable earnings that will not be distributed as qualified patronage refunds. The Association distributes patronage on the basis of book income.

The Association may use the Bank, internal resources or third parties to obtain fair value prices. Quoted market prices are generally used when estimating fair values of any assets or liabilities for which observable, active markets exist. A number of methodologies may be employed to value items for which an observable active market does not exist. Examples of these items include: impaired loans, other property owned, and certain derivatives, investment securities and other financial instruments. Inputs to these valuations can involve estimates and assumptions that require a substantial degree of judgment. Some of the assumptions used include, among others, discount rates, rates of return on assets, repayment rates, cash flows, default rates, costs of servicing, and liquidation values. The use of different assumptions could produce significantly different asset or liability values, which could have material positive or negative effects on results of operations.

The Association accounts for income taxes under the asset and liability method, recognizing deferred tax assets and liabilities for the expected future tax consequences of the temporary differences between the carrying amounts and tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be realized or settled. The Association records a valuation allowance at the balance sheet dates against that portion of the Association’s deferred tax assets that, based on management’s best estimates of future events and circumstances, more likely than not (a likelihood of more than 50 percent) will not be realized. The consideration of valuation allowances involves various estimates and assumptions as to future

Additional information may be found in Note 8. L. Off-Balance-Sheet Credit Exposures: The credit risk associated with commitments to extend credit and letters of credit is essentially the same as that involved with

37 2021 Annual Report

Farm Credit of Central Florida, ACA extending loans to customers and is subject to normal credit policies. Collateral may be obtained based on management’s assessment of the customer’s creditworthiness.

Lessee Contracts entered into are evaluated at inception to determine if they contain a lease. Assets and liabilities are recognized on the Consolidated Balance Sheets to reflect the rights and obligations created by any contracts that do. These contracts are then classified as either operating or finance leases.

Commitments to extend credit are agreements to lend to customers, generally having fixed expiration dates or other termination clauses that may require payment of a fee.

In the course of normal operations, the Association may enter into leases for various business purposes. Generally, leases are for terms of three to five years and may include options to extend or terminate the arrangement. Any options are assessed individually to determine if it is reasonably certain they will be exercised.

Letters of credit are commitments issued to guarantee the performance of a customer to a third party. These letters of credit are issued to facilitate commerce and typically result in the commitment being funded when the underlying transaction is consummated between the customer and third party.

Right-of-use (ROU) assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make the payments arising from the lease. ROU assets and lease liabilities are initially recognized based on the present value of lease payments over the lease term. Lease expense for operating leases is recognized on a straight-line basis over the lease term. Lease expense for finance leases is recognized on a declining basis over the lease term.

M. Revenue Recognition: The Association generates income from multiple sources. Financial Instruments The largest source of revenue for the Association is interest income. Interest income is recognized on an accrual basis driven by nondiscretionary formulas based on written contracts, such as loan agreements or securities contracts. Credit-related fees, including letter of credit fees, finance charges and other fees are recognized in Noninterest Income when earned. Other types of noninterest revenues, such as service charges, professional services and broker fees, are accrued and recognized into income as services are provided and the amount of fees earned is reasonably determinable.

ROU assets are included on the Consolidated Balance Sheets in Premises and Equipment for finance leases and Other Assets for operating leases. Lease liabilities are included in Other Liabilities on the Consolidated Balance Sheets. Leases with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheets and lease expense is recognized over the lease term.

Contracts with Customers The Association maintains contracts with customers to provide support services in various areas such as accounting, lending transactions, consulting, insurance, and information technology. As most of the contracts are to provide access to expertise or system capacity that the Association maintains, there are no material incremental costs to fulfill these contracts that should be capitalized. The Association also does not generally incur costs to obtain contracts. Revenue is recognized to reflect the transfer of goods and services to customers in an amount equal to the consideration the Association receives or expects to receive.

Lessor The Association may act as lessor in certain contractual arrangements which relate to office space in an owned property and are considered operating leases. Generally, leases are for terms of three to five years and may include options to extend or terminate the arrangement. Lease income is recognized on a straight-line basis over the lease term. Lease and nonlease components are accounted for separately in the Consolidated Statements of Comprehensive Income. Any initial direct costs are deferred and recognized as an expense over the lease term on the same basis as lease income. Any taxes assessed by a governmental authority are excluded from consideration as variable payments.

Gains and Losses from Nonfinancial Assets Any gains or losses on sales of Premises and Equipment and OPO are included as part of Noninterest Income or Noninterest Expense. These gains and losses are recognized, and the nonfinancial asset is derecognized, when the Association has entered into a valid contract with a noncustomer and transferred control of the asset. If the criteria to meet the definition of a contract have not been met, the Association does not derecognize the nonfinancial asset and any consideration received is recognized as a liability. If the criteria for a contract are subsequently met, or if the consideration received is or becomes nonrefundable, a gain or loss may be recognized at that time.

Lease receivables and income are included in Accounts Receivable on the Consolidated Balance Sheets and Lease Income in the Consolidated Statements of Comprehensive Income. O.

N. Leases: A contract that conveys the right to control the use of an identified asset for a period of time in exchange for consideration is generally considered a lease.

Accounting Standards Updates (ASUs): In October 2020, the FASB issued ASU 2020-10 Codification Improvements. The amendments represent changes to clarify the Codification, correct unintended application of guidance, or make minor improvements to the Codification that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. The Update moves or references several disclosure requirements from Section 45 - Other Presentation Matters to Section 50 - Disclosures. It also

38 2021 Annual Report

Farm Credit of Central Florida, ACA includes minor changes to other guidance such as Cash Balance Plans, Unusual or Infrequent Items, Transfers and Servicing, Guarantees, Income Taxes, Foreign Currency, Imputation of Interest, Not For Profits and Real Estate Projects. Adoption of this guidance had no effect on the statements of financial condition and results of operations.



In January 2020, the FASB issued ASU 2020-01 Investments—Equity Securities (Topic 321), Investments— Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. The amendments clarify certain interactions between the guidance on accounting for certain equity securities under Topic 321, the guidance on accounting for investments under the equity method in Topic 323, and the guidance in Topic 815. The Update could change how an entity accounts for an equity security under the measurement alternative or a forward contract or purchased option to purchase securities that, upon settlement of the forward contract or exercise of the purchased option, would be accounted for under the equity method of accounting or the fair value option in accordance with Topic 825, Financial Instruments. The amendments are intended to improve current GAAP by reducing diversity in practice and increasing comparability of the accounting for these interactions. For public business entities, the amendments were effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Adoption of this guidance had no effect on the statements of financial condition and results of operations.



For public business entities, the amendments in this Update were effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Adoption of this guidance did not have a material impact on the statements of financial condition and results of operations. In June 2016, the FASB issued ASU 2016-13 Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This Update, and subsequent clarifying guidance and amendments issued, is intended to improve financial reporting by requiring timelier recording of credit losses on financial instruments. It requires an organization to measure all expected credit losses for financial assets held at the reporting date through the life of the financial instrument. Financial institutions and other organizations will use forward-looking information to estimate their credit losses. Additionally, the ASU amends the accounting for credit losses on availablefor-sale debt securities and purchased financial assets with credit deterioration. For public companies that are not SEC filers, it will take effect for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. Evaluation of any possible effects the guidance may have on the statements of financial condition and results of operations is in progress.

In December 2019, the FASB issued ASU 2019-12 Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments simplify the accounting for income taxes by removing the following exceptions: 



 

Exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items (for example, discontinued operations or other comprehensive income), Exception to the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment, Exception to the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary, and Exception to the general methodology for calculating income taxes in an interim period when a year-todate loss exceeds the anticipated loss for the year.

Note 3 — Loans and Allowance for Loan Losses For a description of the Association’s accounting for loans, including impaired loans, and the allowance for loan losses, see Note 2 subsection B above. Credit risk arises from the potential inability of an obligor to meet its repayment obligation which exists in outstanding loans. The Association manages credit risk associated with lending activities through an assessment of the credit risk profile of an individual obligor. The Association sets its own underwriting standards and lending policies that provide direction to loan officers and are approved by the Board of Directors.

The amendments also simplify the accounting for income taxes by doing the following: 



was originally recognized and when it should be considered a separate transaction, Specifying that an entity is not required to allocate the consolidated amount of current and deferred tax expense to a legal entity that is not subject to tax in its separate financial statements; however, an entity may elect to do so (on an entity-by-entity basis) for a legal entity that is both not subject to tax and disregarded by the taxing authority, Requiring that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date, and Making minor codification improvements for income taxes related to employee stock ownership plans and investments in qualified affordable housing projects accounted for using the equity method.

Requiring that an entity recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax, Requiring that an entity evaluate when a step up in the tax basis of goodwill should be considered part of the business combination in which the book goodwill

The credit risk management process begins with an analysis of the obligor’s credit history, repayment capacity and financial position. Repayment capacity focuses on the obligor’s ability

39 2021 Annual Report

Farm Credit of Central Florida, ACA to repay the obligation based on cash flows from operations or other sources of income, including non-farm income. Real estate mortgage loans must be secured by first liens on the real estate collateral. As required by FCA regulations, each institution that makes loans on a secured basis must have collateral evaluation policies and procedures.



The credit risk rating process for loans uses a two-dimensional structure, incorporating a 14-point probability of default scale (see further discussion in Note 2 subsection B above) and a separate scale addressing estimated percentage loss in the event of default. The loan rating structure incorporates borrower risk and transaction risk. Borrower risk is the risk of loss driven by factors intrinsic to the borrower. The transaction risk or facility risk is related to the structure of a credit (tenor, terms, and collateral).



The Association’s loan portfolio, which includes purchased interests in loans, has been segmented by the following loan types as defined by the FCA:



Real estate mortgage loans — loans made to full-time or part-time farmers secured by first lien real estate mortgages with maturities from five to thirty years. These loans may be made only in amounts up to 85 percent of the appraised value of the property taken as security or up to 97 percent of the appraised value if guaranteed by a federal, state, or other governmental agency. The actual percentage of loanto-appraised value when loans are made is generally lower than the statutory required percentage. Production and intermediate-term loans — loans to fulltime or part-time farmers that are not real estate mortgage loans. These loans fund eligible financing needs including operating inputs (such as labor, feed, fertilizer, and repairs), livestock, living expenses, income taxes, machinery or equipment, farm buildings, and other business-related expenses. Production loans may be made on a secured or unsecured basis and are most often made for a period of time that matches the borrower’s normal production and marketing cycle, which is typically one year or less. Intermediate-term loans are made for a specific term, generally greater than one year and less than or equal to ten years.

 

Loans to cooperatives — loans for any cooperative purpose other than for communication, power, and water and waste disposal. Processing and marketing loans — loans for operations to process or market the products produced by a farmer, rancher, or producer or harvester of aquatic products, or by a cooperative. Farm-related business loans — loans to eligible borrowers that furnish certain farm-related business services to farmers or ranchers that are directly related to their agricultural production. Rural residential real estate loans — loans made to individuals, who are not farmers, to purchase a singlefamily dwelling that will be the primary residence in open country, which may include a town or village that has a population of not more than 2,500 persons. In addition, the loan may be to remodel, improve, or repair a rural home, or to refinance existing debt. These loans are generally secured by a first lien on the property. Communication loans — loans primarily to finance rural communication providers. Power loans — loans primarily to finance electric generation, transmission and distribution systems serving rural areas. Water and waste disposal loans — loans primarily to finance water and waste disposal systems serving rural areas. International loans — primarily loans or credit enhancements to other banks to support the export of U.S. agricultural commodities or supplies. The federal government guarantees a substantial portion of these loans. Lease receivables — the net investment for all finance leases such as direct financing leases, leveraged leases, and sales-type leases. Other (including Mission Related) — additional investments in rural America approved by the FCA on a program or a case-by-case basis. Examples of such investments include partnerships with agricultural and rural community lenders, investments in rural economic development and infrastructure, and investments in obligations and mortgage securities that increase the availability of affordable housing in rural America.

A summary of loans outstanding at period end follows:

Real estate mortgage Production and intermediate-term Loans to cooperatives Processing and marketing Farm-related business Communication Power and water/waste disposal Rural residential real estate International Total loans

2021 450,053 177,705 6,591 76,109 21,115 4,961 1,442 12,993 6,438 757,407

December 31, 2020 $ 389,241 148,613 8,865 74,678 6,241 14,446 – 9,576 6,438 $ 658,098

2019 313,117 156,828 2,488 60,146 6,609 11,450 3,105 8,257 6,435 568,435

A substantial portion of the Association’s lending activities is collateralized and the Association’s exposure to credit loss associated with lending activities is reduced accordingly. The amount of collateral obtained, if deemed necessary upon extension of credit, is based on management’s credit evaluation of the borrower. Collateral held varies, but typically includes farmland and income-producing property, such as crops and livestock, as well as

40 2021 Annual Report

Farm Credit of Central Florida, ACA receivables. Long-term real estate loans are collateralized by the first liens on the underlying real property. Federal regulations state that long-term real estate loans are not to exceed 85 percent (97 percent if guaranteed by a government agency) of the property’s appraised value. However, a decline in a property’s market value subsequent to loan origination or advances, or other actions necessary to protect the financial interest of the Association in the collateral, may result in loan to value ratios in excess of the regulatory maximum. The Association may purchase or sell participation interests with other parties in order to diversify risk, manage loan volume, and comply with FCA regulations. The following tables present the principal balance of participation loans at periods ended:

Real estate mortgage Production and intermediate-term Loans to cooperatives Processing and marketing Farm-related business Communication Power and water/waste disposal International Total

Within AgFirst District Participations Participations Purchased Sold $ 24,579 $ 59,693 26,787 69,623 6,613 – 43,327 44,090 685 – 4,995 – 1,446 – 6,446 – $ 114,878 $ 173,406

December 31, 2021 Within Farm Credit System Outside Farm Credit System Participations Participations Participations Participations Sold Purchased Sold Purchased $ – $ 32,855 $ – $ – 17,630 2,450 – – – – – – 406 26,653 – – 433 – – – – – – – – – – – – – – – $ 18,469 $ 61,958 $ – $ –

Total Participations Participations Purchased Sold $ 24,579 $ 92,548 44,417 72,073 6,613 – 43,733 70,743 1,118 – 4,995 – 1,446 – 6,446 – $ 133,347 $ 235,364

Real estate mortgage Production and intermediate-term Loans to cooperatives Processing and marketing Farm-related business Communication International Total

Within AgFirst District Participations Participations Purchased Sold $ 30,183 $ 45,595 30,752 59,135 8,890 – 47,691 31,723 685 1,049 14,483 – 6,446 – $ 139,130 $ 137,502

December 31, 2020 Within Farm Credit System Outside Farm Credit System Participations Participations Participations Participations Sold Purchased Sold Purchased $ 4,000 $ 33,843 $ – $ – 1,585 1,575 – – – – – – – 18,300 – – – – – – – – – – – – – – $ 5,585 $ 53,718 $ – $ –

Total Participations Participations Purchased Sold $ 34,183 $ 79,438 32,337 60,710 8,890 – 47,691 50,023 685 1,049 14,483 – 6,446 – $ 144,715 $ 191,220

Real estate mortgage Production and intermediate-term Loans to cooperatives Processing and marketing Farm-related business Communication Power and water/waste disposal International Total

Within AgFirst District Participations Participations Purchased Sold $ 22,842 $ 49,790 24,626 64,114 2,499 – 35,616 20,097 685 – 11,486 – 3,122 – 6,446 – $ 107,322 $ 134,001

December 31, 2019 Within Farm Credit System Outside Farm Credit System Participations Participations Participations Participations Sold Purchased Sold Purchased $ – $ 33,372 $ – $ – – 2,550 – – – – – – – 15,216 – – – – – – – – – – – – – – – – – – $ – $ 51,138 $ – $ –

Total Participations Participations Purchased Sold $ 22,842 $ 83,162 24,626 66,664 2,499 – 35,616 35,313 685 – 11,486 – 3,122 – 6,446 – $ 107,322 $ 185,139

41 2021 Annual Report

Farm Credit of Central Florida, ACA The recorded investment in a receivable is the face amount increased or decreased by applicable accrued interest and unamortized premium, discount, finance charges, or acquisition costs and may also reflect a previous direct write-down of the investment. The following table shows loans and related accrued interest classified under the FCA Uniform Loan Classification System as a percentage of total loans and related accrued interest receivable by loan type as of: 2021 Real estate mortgage: Acceptable OAEM Substandard/doubtful/loss Production and intermediateterm: Acceptable OAEM Substandard/doubtful/loss Loans to cooperatives: Acceptable OAEM Substandard/doubtful/loss Processing and marketing: Acceptable OAEM Substandard/doubtful/loss Farm-related business: Acceptable OAEM Substandard/doubtful/loss

99.75% 0.08 0.17 100.00%

96.50% 0.28 3.22 100.00% 100.00% – – 100.00% 100.00% – – 100.00% 100.00% – – 100.00%

December 31, 2020 99.70% 0.15 0.15 100.00%

95.12% 3.07 1.81 100.00% 100.00% – – 100.00% 100.00% – – 100.00% 100.00% – – 100.00%

2019

2021 Communication: Acceptable OAEM Substandard/doubtful/loss

98.78% 0.14 1.08 100.00%

Power and water/waste disposal: Acceptable OAEM Substandard/doubtful/loss

96.49% 0.93 2.58 100.00%

Rural residential real estate: Acceptable OAEM Substandard/doubtful/loss

100.00% – – 100.00%

International: Acceptable OAEM Substandard/doubtful/loss

99.78% – 0.22 100.00%

Total Loans: Acceptable OAEM Substandard/doubtful/loss

100.00% – – 100.00%

December 31, 2020

100.00% – – 100.00%

100.00% – – –%

–% – – –%

–% 100.00 – 100.00%

98.19% 0.65 1.16 100.00%

95.70% 0.94 3.36 100.00%

93.56% 0.28 6.16 100.00%

100.00% – – 100.00%

99.00% 0.13 0.87 100.00%

98.66% 0.79 0.55 100.00%

97.70% 0.88 1.42 100.00%

The following tables provide an aging analysis of past due loans and related accrued interest as of: December 31, 2021

30 Through 89 Days Past Due $ 360 189 – – – – – 168 – $ 717

90 Days or More Past Due $ 1,996 1,504 – – – – – 16 – $ 3,516

Total Past Due $ 2,356 1,693 – – – – – 184 – $ 4,233

Not Past Due or Less Than 30 Days Past Due $ 449,788 176,500 6,595 76,263 21,176 4,962 1,442 12,858 6,451 $ 756,035

Total Loans $ 452,144 178,193 6,595 76,263 21,176 4,962 1,442 13,042 6,451 $ 760,268

Not Past Due or Less Than 30 Days Past Due $ 390,769 147,306 8,869 74,847 6,253 14,447 9,463 6,451 $ 658,405

Total Loans $ 391,273 148,987 8,869 74,847 6,253 14,447 9,619 6,451 $ 660,746

December 31, 2020

Real estate mortgage Production and intermediate-term Loans to cooperatives Processing and marketing Farm-related business Communication Rural residential real estate International Total

30 Through 89 Days Past Due $ – 681 – – – – 132 – $ 813

90 Days or More Past Due $ 504 1,000 – – – – 24 – $ 1,528

42 2021 Annual Report

Total Past Due $ 504 1,681 – – – – 156 – $ 2,341

2019

Farm Credit of Central Florida, ACA December 31, 2019

30 Through 89 Days Past Due $ 1,808 703 – 136 – – – 142 – $ 2,789

90 Days or More Past Due $ 1,306 2,009 – – – – – 335 – $ 3,650

Total Past Due $ 3,114 2,712 – 136 – – – 477 – $ 6,439

Not Past Due or Less Than 30 Days Past Due $ 311,565 154,677 2,490 60,158 6,625 11,452 3,108 7,810 6,460 $ 564,345

Total Loans $ 314,679 157,389 2,490 60,294 6,625 11,452 3,108 8,287 6,460 $ 570,784

Nonperforming assets (including related accrued interest) and related credit quality statistics were as follows: December 31, 2020

2021 Nonaccrual loans: Real estate mortgage Production and intermediate-term Rural residential real estate Total Accruing restructured loans: Real estate mortgage Production and intermediate-term Rural residential real estate Total Accruing loans 90 days or more past due: Total

2,510 1,857 16 4,383

Total nonperforming loans Other property owned Total nonperforming assets

708 1,404 135 2,247

$ $ $

Nonaccrual loans as a percentage of total loans Nonperforming assets as a percentage of total loans and other property owned Nonperforming assets as a percentage of capital

2019

2,666 2,691 107 5,464

3,107 3,435 425 6,967

824 1,997 230 3,051

4,643 3,329 246 8,218

–

6,630 – 6,630

8,515 227 8,742

15,185 – 15,185

0.58%

0.83%

1.23%

0.88% 5.21%

1.33% 7.37%

2.67% 13.39%

The following table presents information relating to impaired loans (including accrued interest) as defined in Note 2: December 31, 2020

2021 Impaired nonaccrual loans: Current as to principal and interest Past due Total Impaired accrual loans: Restructured 90 days or more past due Total Total impaired loans Additional commitments to lend

$ $ $

678 3,705 4,383

$ $

2,247 – 2,247 6,630

–

43 2021 Annual Report

$ $ $

3,339 2,125 5,464

2019 $ $ $

1,269 5,698 6,967

$ $

3,051 – 3,051 8,515

$ $

8,218 – 8,218 15,185

–

Farm Credit of Central Florida, ACA The following tables present additional impaired loan information at period end. Unpaid principal balance represents the contractual principal balance of the loan.

Recorded Investment

Impaired loans:

With a related allowance for credit losses: Real estate mortgage $ Production and intermediate-term Rural residential real estate Total $

1,590 2,938 136 4,664

With no related allowance for credit losses: Real estate mortgage $ Production and intermediate-term Rural residential real estate Total $

1,628 323 15 1,966

Total impaired loans: Real estate mortgage Production and intermediate-term Rural residential real estate Total

3,218 3,261 151 6,630

$ $

Recorded Investment

Impaired loans:

With a related allowance for credit losses: Real estate mortgage $ Production and intermediate-term Rural residential real estate Total $

2,520 3,941 230 6,691

With no related allowance for credit losses: Real estate mortgage $ 970 Production and intermediate-term 747 Rural residential real estate 107 Total $ 1,824 Total impaired loans: Real estate mortgage Production and intermediate-term Rural residential real estate Total

$ $

3,490 4,688 337 8,515

Recorded Investment

Impaired loans:

With a related allowance for credit losses: Real estate mortgage $ Production and intermediate-term Rural residential real estate Total $

2,242 3,696 495 6,433

With no related allowance for credit losses: Real estate mortgage $ Production and intermediate-term Rural residential real estate Total $

5,508 3,068 176 8,752

Total impaired loans: Real estate mortgage Production and intermediate-term Rural residential real estate Total

$ $

7,750 6,764 671 15,185

December 31, 2021 Unpaid Principal Balance $ $ $ $ $ $

1,705 2,513 134 4,352 1,858 942 58 2,858 3,563 3,455 192 7,210

Related Allowance $

$ $ $ $ $

2,721 3,457 229 6,407 1,165 1,490 215 2,870 3,886 4,947 444 9,277

$ $ $ $ $

2,458 3,702 620 6,780 5,536 3,347 247 9,130 7,994 7,049 867 15,910

– – – –

$ $

53 930 11 994

$ $ $ $ $ $

$ $

71 1,035 – 1,106

– – – –

$ $ $

71 1,035 – 1,106

$ $ $ $ $ $

725 792 97 1,614

– – – –

$ $ $

725 792 97 1,614

44 2021 Annual Report

1,945 385 18 2,349 3,846 3,896 180 7,922

$ $ $ $ $ $

136 251 12 399 139 28 1 168 275 279 13 567

3,644 5,700 332 9,676 1,405 1,079 154 2,638 5,049 6,779 486 12,314

$ $ $ $ $ $

216 338 20 574 84 64 9 157 300 402 29 731

Year Ended December 31, 2019 Interest Income Average Recognized on Impaired Impaired Loans Loans

Related Allowance $

1,900 3,511 162 5,573

Year Ended December 31, 2020 Interest Income Average Recognized on Impaired Impaired Loans Loans

Related Allowance

December 31, 2019 Unpaid Principal Balance $

53 930 11 994

December 31, 2020 Unpaid Principal Balance $

Year Ended December 31, 2021 Interest Income Average Recognized on Impaired Impaired Loans Loans

$ $ $ $ $ $

2,528 4,166 558 7,252 6,207 3,460 199 9,866 8,735 7,626 757 17,118

$ $ $ $ $ $

217 358 48 623 533 297 17 847 750 655 65 1,470

Farm Credit of Central Florida, ACA A summary of changes in the allowance for loan losses and period end recorded investment in loans is as follows: Real Estate Mortgage

Activity related to the allowance for credit losses: Balance at December 31, 2020 $ 1,195 $ Charge-offs – Recoveries 36 Provision for loan losses (198) Balance at December 31, 2021 $ 1,033 $ Balance at December 31, 2019 Charge-offs Recoveries Provision for loan losses Balance at December 31, 2020

Balance at December 31, 2018 Charge-offs Recoveries Provision for loan losses Balance at December 31, 2019

1,468 – 6 (279) 1,195

1,255 (8) 92 129 1,468

Allowance on loans evaluated for impairment: Individually $ 53 Collectively 980 Balance at December 31, 2021 $ 1,033 Individually Collectively Balance at December 31, 2020 Individually Collectively Balance at December 31, 2019

$ $ $ $

71 1,124 1,195 725 743 1,468

Agribusiness*

Communication

Power and Water/Waste Disposal

1,775 (7) 75 (93) 1,750

1,390 (5) – 390 1,775

1,749 (6) 132 (485) 1,390

Production and Intermediateterm

$ $ $ $ $ $ $

930 820 1,750

4,744 144,243 148,987

Individually Collectively Balance at December 31, 2019

$ $

7,749 306,930 314,679

$ $

792 598 1,390

Individually Collectively Balance at December 31, 2020

3,261 174,932 178,193

1,035 740 1,775

Recorded investment in loans evaluated for impairment: Individually $ 3,219 $ Collectively 448,925 Balance at December 31, 2021 $ 452,144 $ 3,490 387,783 391,273

6,829 150,560 157,389

$ $ $ $ $ $ $

258 – – (1) 257

107 – – 151 258

100 – – 7 107

– 257 257

$ $ $

– 258 258

– 107 107

– 104,034 104,034 – 89,969 89,969 – 69,409 69,409

$ $ $ $ $ $ $

20 – – (14) 6

19 – – 1 20

37 – – (18) 19

– 6 6

– 20 20

– 19 19

– 4,962 4,962 – 14,447 14,447 – 11,452 11,452

$ $ $ $ $ $ $

Rural Residential Real Estate

– – – 2 2

17 – – (17) –

5 – – 12 17

– 2 2

– – –

– 17 17

– 1,442 1,442

– – – – 3,108 3,108

$ $ $ $ $

International

33 – 20 (36) 17

110 (62) 17 (32) 33

122 (10) 67 (69) 110

11 6 17

$ $ $

– 33 33

97 13 110

151 12,891 13,042

337 9,282 9,619 671 7,616 8,287

$ $ $ $ $

Total

2 – – – 2

– 2 2

3,270 (24) 291 (424) 3,113

$ $

994 2,073 3,067

$ $

– 2 2

– 6,451 6,451

– 6,460 6,460

3,113 (67) 23 214 3,283

– 2 2

– 6,451 6,451

3,283 (7) 131 (340) 3,067

1,106 2,177 3,283

1,614 1,499 3,113

$ $ $ $ $

6,631 753,637 760,268 8,571 652,175 660,746 15,249 555,535 570,784

* Includes the loan types: Loans to cooperatives, Processing and Marketing, and Farm-related business.

To mitigate risk of loan losses, the Association may enter into guarantee arrangements with certain GSEs, including the Federal Agricultural Mortgage Corporation (Farmer Mac), and state or federal agencies. These guarantees generally remain in place until the loans are paid in full or expire and give the Association the right to be reimbursed for losses incurred or to sell designated loans to the guarantor in the event of default (typically four months past due), subject to certain conditions. The guaranteed balance of designated loans under these agreements was $129,596, $113,974, and $98,166 at December 31, 2021, 2020, and 2019, respectively. Fees paid for such guarantee commitments totaled $422, $399, and $352 for 2020, 2020, and 2019, respectively. These amounts are classified as noninterest expense. A restructuring of a debt constitutes a troubled debt restructuring (TDR) if the creditor for economic or legal reasons related to the debtor’s financial difficulties grants a concession to the debtor that it would not otherwise consider. There were no new TDRs that occurred during the periods presented. Interest concessions may include interest forgiveness and interest deferment. Principal concessions may include principal forgiveness, principal deferment, and maturity extension. Other concessions may include additional compensation received which might be in the form of cash or other assets. There were no TDRs that occurred during the previous twelve months and for which there was a subsequent payment default during periods presented. Payment default is defined as a payment that was thirty days or more past due.

45 2021 Annual Report

Farm Credit of Central Florida, ACA The following table provides information at each period end on outstanding loans restructured in troubled debt restructurings. These loans are included as impaired loans in the impaired loan table.

Real estate mortgage Production and intermediate-term Rural residential real estate Total loans

2021 708 1,506 135 2,349

Additional commitments to lend

–

Total TDRs December 31, 2020 $ 824 2,109 229 $ 3,162

2019 4,741 3,761 245 8,747

–

Investments in Debt Securities The Association’s investments consist primarily of assetbacked securities (ABSs). These ABSs are issued through the Small Business Administration and are guaranteed by the full faith and credit of the United States government. They are held for managing short-term surplus funds and reducing interest rate risk. These securities meet the applicable FCA regulatory guidelines related to government agency guaranteed investments. A summary of the amortized cost and fair value of investment securities held-to-maturity follows:

ABSs

Amortized Cost $ 2,748

Amortized Cost $ 3,966

December 31, 2020 Gross Gross Unrealized Unrealized Fair Gains Losses Value $ 13 $ (55) $ 3,924

Yield 2.92%

Amortized Cost $ 5,262

December 31, 2019 Gross Gross Unrealized Unrealized Fair Gains Losses Value $ 15 $ (72) $ 5,205

Yield 4.54%

In one year or less After one year through five years After five years through ten years After ten years Total

– 121 611 1,988 2,720

2019 98 432 (1) 529

ABSs

December 31, 2020 Less than 12 Months 12 Months or Greater Fair Unrealized Fair Unrealized Value Losses Value Losses $ 359 $ – $ 2,456 $ (55)

ABSs

December 31, 2019 Less than 12 Months 12 Months or Greater Fair Unrealized Fair Unrealized Value Losses Value Losses $ 284 $ (2) $ 3,221 $ (70)

The recording of an impairment loss is predicated on: (1) whether or not management intends to sell the security, (2) whether it is more likely than not that management would be required to sell the security before recovering its costs, and (3) whether management expects to recover the security’s entire amortized cost basis (even if there is no intention to sell). If the Association intends to sell the security or it is more likely than not that it would be required to sell the security, the impairment loss equals the full difference between amortized cost and fair value of the security. When the Association does not intend to sell securities in an unrealized loss position and it is not more likely than not that it would be required to sell the securities, other-than-temporary impairment (OTTI) loss is separated into credit loss and non-credit loss. Credit loss is defined as the shortfall of the present value of the cash flows expected to be collected in relation to the amortized cost basis.

December 31, 2021 Fair Value

December 31, 2021 Less than 12 Months 12 Months or Greater Fair Unrealized Fair Unrealized Value Losses Value Losses $ 2 $ – $ 1,578 $ (35)

Yield 3.09%

A summary of the contractual maturity, amortized cost and estimated fair value of investment securities held-to-maturity follows:

Amortized Cost $ – 121 615 2,012 $ 2,748

2021 – 102 – 102

An investment is considered impaired if its fair value is less than its cost. The following tables show the fair value and gross unrealized losses for investments that were in a continuous unrealized loss position aggregated by investment category at each reporting period. A continuous unrealized loss position for an investment is measured from the date the impairment was first identified.

Note 4 — Investments

December 31, 2021 Gross Gross Unrealized Unrealized Fair Gains Losses Value $ 7 $ (35) $ 2,720

Nonaccrual TDRs December 31, 2020 $ – 112 (1) $ 111

Weighted Average Yield –% 3.52 2.66 3.20 3.09%

A portion of these investments has contractual maturities in excess of ten years. However, expected maturities for these types of securities can differ from contractual maturities because borrowers may have the right to prepay obligations with or without prepayment penalties.

The Association performs periodic credit reviews, including OTTI analyses, on its investment securities portfolio. The objective is to quantify future possible loss of principal or interest due on securities in the portfolio.

46 2021 Annual Report

Farm Credit of Central Florida, ACA funds based on specified factors or formulas relating primarily to credit quality and financial condition. At December 31, 2021, the Association’s notes payable were within the specified limitations.

The Association has not recognized any credit losses as any impairments were deemed temporary and resulted from noncredit related factors. The Association has the ability and intent to hold these temporarily impaired investments until a recovery of unrealized losses occurs, which may be at maturity, and at this time expects to collect the full principal amount and interest due on these securities, especially after considering credit enhancements.

The Association’s indebtedness to the Bank represents borrowings by the Association to fund its earning assets. This indebtedness is collateralized by a pledge of substantially all of the Association’s assets and the terms of the revolving lines of credit are governed by the GFA. Interest rates on both variable and fixed rate advances are generally established loan-by-loan based on the Bank’s marginal cost of funds, capital position, operating costs and return objectives. In the event of prepayment of any portion of a fixed rate advance, the Association may incur a prepayment penalty in accordance with the terms of the GFA and which will be included in interest expense. The interest rate is periodically adjusted by the Bank based upon agreement between the Bank and the Association.

Substantially all of these investments were in U.S. government agency securities and the Association expects these securities would not be settled at a price less than their amortized cost. All securities continue to perform at period end. Equity Investments in Other Farm Credit Institutions Equity investments in other Farm Credit System institutions are generally nonmarketable investments consisting of stock and participation certificates, allocated surplus, and reciprocal investments in other institutions regulated by the FCA. These investments are carried at cost and evaluated for impairment based on the ultimate recoverability of the par value rather than by recognizing temporary declines in value.

The weighted average interest rates on the variable rate advances were 1.46 percent for LIBOR-based loans and 1.55 percent for Prime-based loans, and the weighted average remaining maturities were 4.0 years and 3.8 years, respectively, at December 31, 2021. The weighted-average interest rate on the fixed rate and adjustable rate mortgage (ARM) loans which are match funded by the Bank was 2.38 percent, and the weighted average remaining maturity was 13.3 years at December 31, 2021. The weighted-average interest rate on all interest-bearing notes payable was 2.12 percent and the weighted-average remaining maturity was 10.6 years at December 31, 2021. Variable rate and fixed rate notes payable represent approximately 15.50 percent and 84.50 percent, respectively, of total notes payable at December 31, 2021. The weighted average maturities described above are related to matched-funded loans. The Direct Note itself has an annual maturity as prescribed in the GFA.

The Association is required to maintain ownership in the Bank in the form of Class B or Class C stock as determined by the Bank. The Bank may require additional capital contributions to maintain its capital requirements. The Association’s investment in the Bank totaled $5,983 for 2021, $5,983 for 2020 and $6,123 for 2019. The Association owned 2.33 percent of the issued stock of the Bank as of December 31, 2021 net of any reciprocal investment. As of that date, the Bank’s assets totaled $39.3 billion and shareholders’ equity totaled $2.3 billion. The Bank’s earnings were $486 million for 2021. In addition, the Association had investments of $772 related to other Farm Credit institutions at December 31, 2021. Note 5 — Premises and Equipment Premises and equipment consists of the following:

Land Buildings and improvements Furniture and equipment Less: accumulated depreciation Total

2021 $ 658 3,945 1,647 6,250 1,449 $ 4,801

December 31, 2020 $ 658 3,767 1,760 6,185 1,249 $ 4,936

Note 7 — Members’ Equity A description of the Association’s capitalization requirements, protection mechanisms, regulatory capitalization requirements and restrictions, and equities are provided below:

2019 $ 658 2,157 1,483 4,298 1,715 $ 2,583

A. Protected Borrower Equity: Protection of certain borrower equity is provided under the Farm Credit Act which requires the Association, when retiring protected borrower equity, to retire such equity at par or stated value regardless of its book value. Protected borrower equity includes capital stock, participation certificates and allocated equities which were outstanding as of January 6, 1988, or were issued or allocated prior to October 6, 1988. If an Association is unable to retire protected borrower equity at par value or stated value, amounts required to retire this equity would be obtained from the Insurance Fund.

Note 6 — Debt Notes Payable to AgFirst Farm Credit Bank Under the Farm Credit Act, the Association is obligated to borrow only from the Bank, unless the Bank approves borrowing from other funding sources. The borrowing relationship is established with the Bank through a General Financing Agreement (GFA). The GFA utilizes the Association’s credit and fiscal performance as criteria for establishing a line of credit on which the Association may draw funds. The GFA has a one year term which expires on December 31 and is renewable each year. The Association has no reason to believe the GFA will not be renewed upon expiration. The Bank, consistent with FCA regulations, has established limitations on the Association’s ability to borrow

B. Capital Stock and Participation Certificates: In accordance with the Farm Credit Act and the Association’s capitalization bylaws, each borrower is required to invest in Class C stock for agricultural loans, or participation certificates in the case of rural home and farm related business loans, as a condition of borrowing. The initial borrower investment, through either purchase or transfer, must be in an amount equal to the lesser of $1 thousand or

47 2021 Annual Report

Farm Credit of Central Florida, ACA The ratios are calculated using three-month average daily balances, in accordance with FCA regulations, as follows:

two percent of the amount of the loan. The Board of Directors may increase the amount of investment if necessary to meet the Association’s capital needs. Loans designated for sale or sold into the Secondary Market on or after April 16, 1996 will have no voting stock or participation certificate purchase requirement if sold within 180 days following the date of designation.



The borrower acquires ownership of the capital stock or participation certificates at the time the loan is made, but usually does not make a cash investment. The aggregate par value is generally added to the principal amount of the related loan obligation. The Association retains a first lien on the stock or participation certificates owned by borrowers. Retirement of such equities will generally be at the lower of par or book value, and repayment of a loan does not automatically result in retirement of the corresponding stock or participation certificates.

 

C. Regulatory Capitalization Requirements and Restrictions: An FCA regulation empowers it to direct a transfer of funds or equities by one or more System institutions to another System institution under specified circumstances. The Association has not been called upon to initiate any transfers and is not aware of any proposed action under this regulation.



There are currently no prohibitions in place that would prevent the Association from retiring stock, distributing earnings, or paying dividends per the statutory and regulatory restrictions, and the Association has no reason to believe any such restrictions may apply in the future.

 

The capital regulations ensure that the System’s capital requirements are comparable to the Basel III framework and the standardized approach that the federal banking regulatory agencies have adopted. Regulatory ratios include common equity tier 1 (CET1) capital, tier 1 capital, and total capital risk-based ratios. The regulations also include a tier 1 leverage ratio which includes an unallocated retained earnings (URE) and URE equivalents (UREE) component. The permanent capital ratio (PCR) remains in effect.

The CET1 capital ratio is the sum of statutory minimum purchased borrower stock, other required borrower stock held for a minimum of 7 years, allocated equities held for a minimum of 7 years or not subject to revolvement, unallocated retained earnings, and paid-in capital, less certain regulatory required deductions including the amount of investments in other System institutions, divided by average risk-adjusted assets. The tier 1 capital ratio is CET1 capital plus noncumulative perpetual preferred stock, divided by average risk-adjusted assets. The total capital ratio is tier 1 capital plus other required borrower stock held for a minimum of 5 years, subordinated debt and limited-life preferred stock greater than 5 years to maturity at issuance subject to certain limitations, and allowance for loan losses and reserve for unfunded commitments under certain limitations less certain investments in other System institutions under the corresponding deduction approach, divided by average risk-adjusted assets. The permanent capital ratio is all at-risk borrower stock, any allocated excess stock, unallocated retained earnings, paid-in capital, subordinated debt and preferred stock subject to certain limitations, less certain investments in other System institutions, divided by PCR risk-adjusted assets. The tier 1 leverage ratio is tier 1 capital, divided by average total assets less regulatory deductions to tier 1 capital. The URE and UREE component of the tier 1 leverage ratio is unallocated retained earnings, paid-in capital, and allocated surplus not subject to revolvement less certain regulatory required deductions including the amount of allocated investments in other System institutions divided by average total assets less regulatory deductions to tier 1 capital.

The following sets forth the regulatory capital ratios:

Ratio Risk-adjusted ratios: CET1 Capital Tier 1 Capital Total Capital Permanent Capital Non-risk-adjusted ratios: Tier 1 Leverage** URE and UREE Leverage

Minimum Requirement

Capital Conservation Buffer*

Minimum Requirement with Capital Conservation Buffer

2021

4.5% 6.0% 8.0% 7.0%

2.5% 2.5% 2.5% 0.0%

7.0% 8.5% 10.5% 7.0%

16.74% 16.74% 17.17% 16.81%

17.87% 17.87% 18.40% 17.97%

20.04% 20.04% 20.48% 20.13%

4.0% 1.5%

1.0% 0.0%

5.0% 1.5%

16.32% 14.34%

17.41% 15.00%

19.49% 16.48%

Capital Ratios as of December 31, 2020

2019

* Includes fully phased-in capital conservation buffers which became effective January 1, 2020. ** The Tier 1 Leverage Ratio must include a minimum of 1.50% of URE and URE Equivalents.

D. Description of Equities: The Association is authorized to issue or have outstanding Classes A and D Preferred Stock, Classes A, B and C Common Stock, Classes B and C Participation Certificates and such other classes of equity as may be provided for in amendments to the bylaws in

48 2021 Annual Report

Farm Credit of Central Florida, ACA nonqualified allocated surplus and $2,152 of nonqualified retained surplus. Nonqualified distributions are tax deductible only when redeemed.

such amounts as may be necessary to conduct the Association’s business. All stock and participation certificates have a par or face value of five dollars ($5.00) per share.

Dividends The Association had the following shares outstanding at December 31, 2021:

Class C Common/Voting C Participation Certificates/Nonvoting Total Capital Stock and Participation Certificates

Protected No No

The Association may declare noncumulative dividends on its capital stock and participation certificates provided the dividend rate does not exceed 20 percent of the par value of the respective capital stock and participation certificates. Such dividends may be paid solely on Classes A and D Preferred Stock or on all classes of stock and participation certificates.

Shares Outstanding Aggregate Number Par Value 195,419 $ 977 34,341 172 229,760

1,149

The rate of dividends paid on Class A Preferred Stock for any fiscal year may not be less than the rate of dividends paid on Classes A, B or C Common Stock or participation certificates for such year. The rate of dividends on Classes A, B and C Common Stock and participation certificates shall be at the same rate per share.

Protected common stock and participation certificates are retired at par or face value in the normal course of business. At-risk common stock and participation certificates are retired at the sole discretion of the Board at book value not to exceed par or face amounts, provided the minimum capital adequacy standards established by the Board are met.

Dividends may not be declared if, after recording the liability, the Association would not meet its capital adequacy standards. No dividends were declared by the Association for any of the periods included in these Consolidated Financial Statements.

Retained Earnings The Association maintains an unallocated retained earnings account and an allocated retained earnings account. The minimum aggregate amount of these two accounts is determined by the Board. At the end of any fiscal year, if the retained earnings accounts otherwise would be less than the minimum amount determined by the Board as necessary to maintain adequate capital reserves to meet the commitments of the Association, the Association shall apply earnings for the year to the unallocated retained earnings account in such amounts as may be determined necessary by the Board. Unallocated retained earnings are maintained for each borrower to permit liquidation on a patronage basis.

Patronage Distributions Prior to the beginning of any fiscal year, the Board, by adoption of a resolution, may obligate the Association to distribute to borrowers on a patronage basis all or any portion of available net earnings for such fiscal year or for that and subsequent fiscal years. Patronage distributions are based on the proportion of the borrower’s interest to the amount of interest earned by the Association on its total loans unless another proportionate patronage basis is approved by the Board. If the Association meets its capital adequacy standards after making the patronage distributions, the patronage distributions may be in cash, authorized stock of the Association, allocations of earnings retained in an allocated members’ equity account, or any one or more of such forms of distribution. Patronage distributions of the Association’s earnings may be paid on either a qualified or nonqualified basis, or a combination of both, as determined by the Board. A minimum of 20 percent of the total qualified patronage distribution to any borrower for any fiscal year shall always be paid in cash.

The Association maintains an allocated retained earnings account consisting of earnings held and allocated to borrowers on a patronage basis. In the event of a net loss for any fiscal year, such allocated retained earnings account will be subject to full impairment in the order specified in the bylaws beginning with the most recent allocation. The Association has a first lien and security interest on all retained earnings account allocations owned by any borrowers, and all distributions thereof, as additional collateral for their indebtedness to the Association. When the debt of a borrower is in default or is in the process of final liquidation by payment or otherwise, the Association, upon approval of the Board, may order any and all retained earnings account allocations owned by such borrower to be applied on the indebtedness.

Transfer Classes A and D Preferred, Classes A, B and C Common Stocks, and Classes B and C Participation Certificates may be transferred to persons or entities eligible to purchase or hold such equities. Impairment

Allocated equities shall be retired solely at the discretion of the Board, provided that minimum capital standards established by the FCA and the Board are met.

Any net losses recorded by the Association shall first be applied against unallocated members’ equity. To the extent that such losses would exceed unallocated members’ equity, such losses would be applied consistent with the

At December 31, 2021, allocated members’ equity consisted of $145 of qualified surplus, $16,806 of

49 2021 Annual Report

Farm Credit of Central Florida, ACA Association’s bylaws and distributed pro rata to each share and/or unit outstanding in the class, in the following order: a) First, Assistance Preferred Stock issued and outstanding (if any); b) Second, allocated surplus evidenced by nonqualified written notices of allocation, in its entirety, with application to most recent allocation first and then in reverse order until all such allocated surplus has been exhausted; c) Third, allocated surplus evidenced by qualified written notices of allocation, in its entirety, with application to most recent allocation first and then in reverse order until all such allocated surplus has been exhausted; d) Fourth, Class A Common and Class B Common Stock, Class C Common Stock, Class E Common Stock, Class C Participation Certificates and Class B Participation Certificates issued and outstanding, pro rata until such stock is fully impaired; e) Fifth, Class A Preferred and Class D Preferred Stock issued and outstanding, if any.

Liquidation In the event of liquidation or dissolution of the Association, any assets of the Association remaining after payment or retirement of all liabilities should be distributed to the holders of the outstanding stock and participation certificates in the following order:

number of shares or units of each such class of stock or participation certificate then issued and outstanding, until an amount equal to the aggregate par value or face amount of all such shares or units has been distributed to such holders; Third, to the holders of allocated surplus evidenced by qualified written notices of allocation, in the order of year of issuance and pro rata by year of issuance, until the total amount of such allocated surplus has been distributed; Fourth, to the holders of allocated surplus evidenced by nonqualified written notices of allocation, in the order of year of issuance and pro rata by year of issuance, until the total amount of such allocated surplus has been distributed; Fifth, in so far as practicable, all unallocated surplus issued after April 15, 1999, shall be distributed to Patrons of the Association from the period beginning April 15, 1999, through the date of liquidation, on a patronage basis; and Sixth, any remaining assets of the Association after such distributions shall be distributed ratably to the holders of all classes of stock and participation certificates in proportion to the number of shares or units of such class of stock or participation certificates held by such holders. All distributions to the holders of any class of stock and/or participation certificate holders shall be made pro rata in proportion to the number of shares or units of such class of stock or participation certificates held by such holders.

a) First, to the holders of Class A Preferred and Class D Preferred Stock until an amount equal to the aggregate par value of all shares of said stock then issued and outstanding has been distributed to such holders; b) Second, to the holders of Class A Common, Class B Common, Class C Common Stock, Class E Common Stock, and Class B Participation Certificates and Class C Participation Certificates, pro rata in proportion to the E. Accumulated Other Comprehensive Income (AOCI):

Changes in Accumulated Other Comprehensive income by Component (a) For the Year Ended December 31, 2021 2020 2019 Employee Benefit Plans: Balance at beginning of period Other comprehensive income before reclassifications Amounts reclassified from AOCI Net current period OCI Balance at end of period

(824) (20) 213 193 (631)

(664) (288) 128 (160) (824)

(461) (271) 68 (203) (664)

Reclassifications Out of Accumulated Other Comprehensive Income (b) For the Year Ended December 31, 2021 2020 2019 Income Statement Line Item Defined Benefit Pension Plans: Periodic pension costs Amounts reclassified

$ $

(213) (213)

$ $

(128) (128)

(a) Amounts in parentheses indicate debits to AOCI. (b) Amounts in parentheses indicate debits to profit/loss.

50 2021 Annual Report

$ $

(68) (68)

See Note 9.

Farm Credit of Central Florida, ACA and judgment about current market conditions, specific issues relating to the collateral and other matters.

Note 8 — Fair Value Measurement Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability.

Notes payable are segregated into pricing pools according to the types and terms of the loans (or other assets) which they fund. Fair value of the notes payable is estimated by discounting the anticipated cash flows of each pricing pool using the current rate that would be charged for additional borrowings. For purposes of this estimate it is assumed the cash flow on the notes is equal to the principal payments on the Association’s loan receivables. This assumption implies that earnings on the Association’s interest margin are used to fund operating expenses and capital expenditures.

Accounting guidance establishes a hierarchy for disclosure of fair value measurements to maximize the use of observable inputs, that is, inputs that reflect the assumptions market participants would use in pricing an asset or liability based on market data obtained from sources independent of the reporting entity. The hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. A financial instrument’s categorization within the hierarchy tiers is based upon the lowest level of input that is significant to the fair value measurement.

Other property owned is classified as a Level 3 asset. The fair value is generally determined using formal appraisals of each individual property. These assets are held for sale. Costs to sell represent transaction costs and are not included as a component of the fair value of other property owned. Other property owned consists of real and personal property acquired through foreclosure or deed in lieu of foreclosure and is carried as an asset held for sale, which is generally not its highest and best use. These properties are part of the Association's credit risk mitigation efforts, not its ongoing business. In addition, FCA regulations require that these types of property be disposed of within a reasonable period of time.

Estimating the fair value of the Association’s equity investments in the Bank and other Farm Credit institutions is not practicable because the stock is not traded. The net investment is a requirement of borrowing from the Bank and is carried at cost. The classifications within the fair value hierarchy (See Note 2) are as follows:

For commitments to extend credit, the estimated market value of off-balance-sheet commitments is minimal since the committed rate approximates current rates offered for commitments with similar rate and maturity characteristics; therefore, the related credit risk is not significant.

Level 1 Assets held in trust funds, related to a supplemental retirement plan, are classified as Level 1. The trust funds include investments in securities that are actively traded and have quoted net asset value prices that are directly observable in the marketplace. These funds may be redeemed on any business day on which the New York Stock Exchange is open for regular trading.

There were no Level 3 assets and liabilities measured at fair value on a recurring basis for the periods presented. The Association had no transfers of assets or liabilities into or out of Level 1 or Level 2 during the periods presented.

For cash, the carrying value is primarily utilized as a reasonable estimate of fair value. Level 2 ABSs, such as those issued through the Small Business Administration, are classified Level 2. Level 3 Because no active market exists for the Association’s accruing loans, fair value is estimated by discounting the expected future cash flows using the Association’s current interest rates at which similar loans currently would be made to borrowers with similar credit risk. The loan portfolio is segregated into pools of loans with homogeneous characteristics based upon repricing and credit risk. Expected future cash flows and interest rates reflecting appropriate credit risk are separately determined for each individual pool. Fair values of loans in a nonaccrual status are estimated to be the carrying amount of the loan less specific reserves. Certain loans evaluated for impairment under FASB guidance have fair values based upon the underlying collateral, as the loans were collateral-dependent. Specific reserves were established for these loans when the value of the collateral, less estimated cost to sell, was less than the principal balance of the loan. The fair value measurement process uses independent appraisals and other market-based information, but in many cases it also requires significant input based on management's knowledge of

51 2021 Annual Report

Farm Credit of Central Florida, ACA Fair values are estimated at each period end date for assets and liabilities measured at fair value on a recurring basis. Other Financial Instruments are not measured at fair value in the statement of financial position, but their fair values are estimated as of each period end date. The following tables summarize the carrying amounts of these assets and liabilities at period end, and their related fair values. December 31, 2021 Total Carrying Amount

Level 1

Level 2

Total Fair Value

Level 3

Recurring Measurements Assets: Assets held in trust funds Recurring Assets

$ $

816 816

$ $

816 816

$ $

– –

$ $

– –

$ $

816 816

Liabilities: Recurring Liabilities

–

3,670 – 3,670

– – –

3,670 – 3,670

– – 740,178 740,178

– 2,720 – 2,720

11 – – 11

11 2,748 750,670 753,429

11 2,720 740,178 742,909

$ $

635,922 635,922

$ $

– –

$ $

– –

$ $

628,756 628,756

$ $

628,756 628,756

Nonrecurring Measurements Assets: Impaired loans Other property owned Nonrecurring Assets Other Financial Instruments Assets: Cash Investments in debt securities, held-to-maturity Loans Other Financial Assets Liabilities: Notes payable to AgFirst Farm Credit Bank Other Financial Liabilities

December 31, 2020 Total Carrying Amount

Level 1

Level 2

Total Fair Value

Level 3

Recurring Measurements Assets: Assets held in trust funds Recurring Assets

$ $

748 748

$ $

748 748

$ $

– –

$ $

– –

$ $

748 748

Liabilities: Recurring Liabilities

–

5,585 227 5,812

– – –

5,585 227 5,812

– – 653,183 653,183

– 3,924 – 3,924

12 – – 12

12 3,966 649,230 653,208

12 3,924 653,183 657,119

$ $

548,714 548,714

$ $

– –

$ $

– –

$ $

553,499 553,499

$ $

553,499 553,499

52 2021 Annual Report

Farm Credit of Central Florida, ACA December 31, 2019 Total Carrying Amount

Level 1

Level 2

Total Fair Value

Level 3

Recurring Measurements Assets: Assets held in trust funds Recurring Assets

$ $

707 707

$ $

707 707

$ $

– –

$ $

– –

$ $

707 707

Liabilities: Recurring Liabilities

–

4,819 – 4,819

– – –

4,819 – 4,819

– – 558,875 558,875

– 5,205 – 5,205

14 – – 14

14 5,262 560,503 565,779

14 5,205 558,875 564,094

$ $

463,711 463,711

$ $

– –

$ $

– –

$ $

464,236 464,236

$ $

464,236 464,236

Nonrecurring Measurements Assets: Impaired loans Other property owned Nonrecurring Assets

Other Financial Instruments Assets: Cash Investments in debt securities, held-to-maturity Loans Other Financial Assets

Liabilities: Notes payable to AgFirst Farm Credit Bank Other Financial Liabilities

certain inputs are interrelated with one another), which may counteract or magnify the fair value impact.

Uncertainty in Measurements of Fair Value Discounted cash flow or similar modeling techniques are generally used to determine the recurring fair value measurements for Level 3 assets and liabilities. Use of these techniques requires determination of relevant inputs and assumptions, some of which represent significant unobservable inputs as indicated in the tables that follow. Accordingly, changes in these unobservable inputs may have a significant impact on fair value.

Inputs to Valuation Techniques Management determines the Association’s valuation policies and procedures. The Bank performs the majority of the Association’s valuations, and its valuation processes are calibrated annually by an independent consultant. The fair value measurements are analyzed on a quarterly basis. For other valuations, documentation is obtained for third party information, such as pricing, and periodically evaluated alongside internal information and pricing that is available.

Certain of these unobservable inputs will (in isolation) have a directionally consistent impact on the fair value of the instrument for a given change in that input. Alternatively, the fair value of the instrument may move in an opposite direction for a given change in another input. Where multiple inputs are used within the valuation technique of an asset or liability, a change in one input in a certain direction may be offset by an opposite change in another input having a potentially muted impact to the overall fair value of that particular instrument. Additionally, a change in one unobservable input may result in a change to another unobservable input (that is, changes in

Quoted market prices are generally not available for the instruments presented below. Accordingly, fair values are based on judgments regarding anticipated cash flows, future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates involve uncertainties and matters of judgment, and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Quantitative Information about Recurring and Nonrecurring Level 3 Fair Value Measurements Impaired loans and other property owned

Fair Value 3,670

Valuation Technique(s) Appraisal

* Ranges for this type of input are not useful because each collateral property is unique.

53 2021 Annual Report

Unobservable Input Income and expense Comparable sales Replacement costs Comparability adjustments

Range * * * *

Farm Credit of Central Florida, ACA Information about Other Financial Instrument Fair Value Measurements

Cash Loans

Valuation Technique(s) Carrying value Discounted cash flow

Investment securities, held-to-maturity

Discounted cash flow

Notes payable to AgFirst Farm Credit Bank

Discounted cash flow

liability balance for the FAP Plan was $39,135, $114,449, and $129,713, respectively. The FAP Plan was 96.17 percent, 89.63 percent, and 87.55 percent funded to the projected benefit obligation as of December 31, 2021, 2020, and 2019, respectively.

Note 9 — Employee Benefit Plans The Association participates in three District sponsored qualified benefit plans. These plans include a multiemployer defined benefit pension plan, the AgFirst Farm Credit Retirement Plan, which is a final average pay plan (FAP Plan). In addition, the Association participates in a multiemployer defined benefit other postretirement benefits plan (OPEB Plan), the Farm Credit Benefits Alliance (FCBA) Retiree and Disabled Medical and Dental Plan, and a defined contribution 401(k) plan (401(k) Plan), the FCBA 401(k) Plan. The risks of participating in these multiemployer plans are different from single employer plans in the following aspects: 1. 2. 3.

In addition to providing pension benefits, the Association provides certain medical and dental benefits for eligible retired employees through the OPEB Plan. Substantially all of the Association employees may become eligible for the benefits if they reach early retirement age while working for the Association. Early retirement age is defined as a minimum of age 55 and 10 years of service. Employees hired after December 31, 2002, and employees who separate from service between age 50 and age 55, are required to pay the full cost of their retiree health insurance coverage. Employees who retire subsequent to December 1, 2007 are no longer provided retiree life insurance benefits. The OPEB Plan includes other Farm Credit System employees that are not employees of the Association or District and is accounted for as a multiemployer plan. The related net benefit plan obligations are not included in the Association’s Balance Sheets but are included in the Combined Statement of Condition for the Farm Credit System. The OPEB Plan is unfunded with expenses paid as incurred. Postretirement benefits other than pensions included in employee benefit costs on the Association’s Statements of Comprehensive Income were $199 for 2021, $149 for 2020, and $162 for 2019. The total AgFirst District liability balance for the OPEB Plan presented in the Farm Credit System Combined Statement of Condition was $209,599, $219,990, and $209,531 at December 31, 2021, 2020, and 2019, respectively.

Assets contributed to multiemployer plans by one employer may be used to provide benefits to employees of other participating employers. If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers. If the Association chooses to stop participating in some of its multiemployer plans, the Association may be required to contribute to eliminate the underfunded status of the plan.

The District’s multiemployer plans are not subject to ERISA and no Form 5500 is required. As such, the following information is neither available for nor applicable to the plans: 1. 2.

3. 4.

Input Par/principal and appropriate interest yield Prepayment forecasts Probability of default Loss severity Prepayment rates Risk adjusted discount rate Prepayment forecasts Probability of default Loss severity

The Employer Identification Number (EIN) and threedigit Pension Plan Number The most recent Pension Protection Act (PPA) zone status. Among other factors, plans in the red zone are generally less than 65 percent funded, plans in the yellow zone are less than 80 percent funded, and plans in the green zone are at least 80 percent funded. The "FIP/RP Status" indicating whether a financial improvement plan (FIP) or a rehabilitation plan (RP) is either pending or has been implemented. The expiration date(s) of collective-bargaining agreement(s).

The Association also participates in the 401(k) Plan, which qualifies as a 401(k) plan as defined by the Internal Revenue Code. For employees hired on or prior to December 31, 2002, the Association contributes $0.50 for each $1.00 of the employee’s first 6.00 percent of contribution (based on total compensation) up to the maximum employer contribution of 3.00 percent of total compensation. For employees hired on or after January 1, 2003, the Association contributes $1.00 for each $1.00 of the employee’s first 6.00 percent of contribution up to the maximum employer contribution of 6.00 percent of total compensation. Employee deferrals are not to exceed the maximum deferral as determined and adjusted by the Internal Revenue Service. The 401(k) Plan costs are expensed as funded. Employer contributions to this plan included in salaries and employee benefit costs were $459, $450, and $426 for the years ended December 31, 2021, 2020, and 2019, respectively. Beginning in 2015, contributions include an additional 3.00 percent of eligible compensation for employees hired after December 31, 2002.

The FAP Plan covers employees hired prior to January 1, 2003 and includes other District employees that are not employees of the Association. It is accounted for as a multiemployer plan. The related net benefit plan obligations are not included in the Association’s Balance Sheets but are included in the Combined Balance Sheets for the AgFirst District. FAP Plan expenses included in employee benefit costs on the Association’s Statements of Comprehensive Income were $927 for 2021, $692 for 2020, and $594 for 2019. At December 31, 2021, 2020, and 2019, the total

54 2021 Annual Report

Farm Credit of Central Florida, ACA The instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the financial statements. Commitments to extend credit are agreements to lend to a borrower as long as there is not a violation of any condition established in the contract. Commercial letters of credit are agreements to pay a beneficiary under conditions specified in the letter of credit. Commitments and letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee.

FASB guidance further requires the determination of the fair value of plan assets and recognition of actuarial gains and losses, prior service costs or credits, and transition assets or obligations as a component of AOCI. Under the guidance, these amounts are subsequently recognized as components of net periodic benefit costs over time. For 2021, 2020, and 2019, $193, $(160), and $(203) has been recognized as a net credit, a net debit, and a net debit to AOCI to reflect these elements. Additional information for the above may be found in the Notes to the Annual Information Statement of the Farm Credit System.

Since many of these commitments are expected to expire without being drawn upon, the total commitments do not necessarily represent future cash requirements. However, these credit-related financial instruments have off-balancesheet credit risk because their amounts are not reflected on the Consolidated Balance Sheets until funded or drawn upon. The credit risk associated with issuing commitments and letters of credit is substantially the same as that involved in extending loans to borrowers and management applies the same credit policies to these commitments. Upon fully funding a commitment, the credit risk amounts are equal to the contract amounts, assuming that borrowers fail completely to meet their obligations and the collateral or other security is of no value. The amount of collateral obtained, if deemed necessary upon extension of credit, is based on management’s credit evaluation of the borrower. At December 31, 2021, $150,283 of commitments to extend credit and $7 of commercial letters of credit were outstanding. There was no reserve for unfunded commitments included in the Consolidated Balance Sheets at December 31, 2021.

In addition to the multiemployer plans described above, the Association sponsors nonqualified supplemental retirement and 401(k) plans. The supplemental retirement plan is unfunded and had a projected benefit obligation of $1,947 and a net underfunded status of $1,947 at December 31, 2021. Assumptions used to determine the projected benefit obligation as of December 31, 2021 included a discount rate of 2.90 percent and a rate of compensation increase of 2.00 percent. The expenses of these nonqualified plans included in noninterest expenses were $310, $216, and $149 for 2021, 2020, and 2019, respectively. Note 10 — Related Party Transactions In the ordinary course of business, the Association enters into loan transactions with officers and directors of the Association, their immediate families and other organizations with which such persons may be associated. Such loans are subject to special approval requirements contained in the FCA regulations and are made on the same terms, including interest rates, amortization schedule, and collateral, as those prevailing at the time for comparable transactions with unaffiliated borrowers.

The Association also participates in standby letters of credit to satisfy the financing needs of its borrowers. These letters of credit are irrevocable agreements to guarantee payments of specified financial obligations. At December 31, 2021, standby letters of credit outstanding totaled $1,160 with expiration dates ranging from January 1, 2022 to May 1, 2023. The maximum potential amount of future payments that may be required under these guarantees was $1,160.

Total gross loans to such persons at December 31, 2021 amounted to $41,398. During 2021, $11,770 of new loans were made and repayments totaled $12,473. In the opinion of management, none of these loans outstanding at December 31, 2020 involved more than a normal risk of collectability.

Note 12 — Income Taxes At December 31, 2021, 2020 and 2019, the Association recorded $35, $75, and $0, respectively for provision or benefit for federal or state income taxes.

Note 11 — Commitments and Contingencies From time to time, legal actions are pending against the Association in which claims for money damages are asserted. On at least a quarterly basis, the Association assesses its liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. While the outcome of legal proceedings is inherently uncertain, on the basis of information presently available, management, after consultation with legal counsel, is of the opinion that the ultimate liability, if any, from these actions, would not be material in relation to the financial position of the Association. Because it is not probable that the Association will incur a loss or the loss is not estimable, no liability has been recorded for any claims that may be pending.

The provision (benefit) for income tax differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to pretax income as follows:

Federal tax at statutory rate Effect of non-taxable FLCA subsidiary Patronage distributions Change in valuation allowance Change in statutory rate Other Provision (benefit) for income taxes

In the normal course of business, the Association may participate in financial instruments with off-balance-sheet risk to satisfy the financing needs of its borrowers. These financial instruments may include commitments to extend credit or letters of credit.

55 2021 Annual Report

2021 $ 4,450 (1,938) (2,436) (43) – 2 $ 35

December 31, 2020 $ 3,396 (1,379) (1,995) 50 – 3 $ 75

2019 2,580 (1,201) (1,365) (20) – 6 $ – $

Farm Credit of Central Florida, ACA realizability of these deferred tax assets and adjust the valuation allowance accordingly.

Deferred tax assets and liabilities are comprised of the following at: 2021 Deferred income tax assets: Allowance for loan losses Net operating loss – carryforward Nonaccrual loan interest Gross deferred tax assets Less: valuation allowance Gross deferred tax assets, net of valuation allowance Deferred income tax liabilities: Loan origination fees Gross deferred tax liability Net deferred tax asset (liability)

656 5,637 93 6,386 (6,334)

December 31, 2020 $

674 5,687 76 6,437 (6,386)

499 5,781 83 6,363 (6,327)

(52) (52) –

(51) (51) –

(36) (36) –

At December 31, 2021 the Association has Federal loss carryforwards totaling approximately $22.2 M that expire in varying amounts beginning in 2026. Of this, $2 million of the net operating losses were generated post 2017 and can be carried forward indefinitely. The valuation allowance at December 31, 2021 was primarily related to federal loss carryforwards that, in the judgment of management, are more likely than not to expire before realized. In evaluating the Company’s ability to recover its deferred income tax assets, it considers all available evidence, both positive and negative, including operating results, ongoing tax planning and forecasts of future taxable income on a jurisdiction by jurisdiction basis.

2019

There were no uncertain tax positions identified related to the current year and the Association has no unrecognized tax benefits at December 31, 2021 for which liabilities have been established. The Association recognizes interest and penalties, if any, related to unrecognized tax benefits as a component of income tax expense.

At December 31, 2021, deferred income taxes have not been provided by the Association on approximately $1.2 million of patronage refunds received from the Bank prior to January 1, 1993. Such refunds, distributed in the form of stock, are subject to tax only upon conversion to cash. The tax liability related to future conversions is not expected to be material. The Association recorded a valuation allowance of $6,334, $6,386 and $6,327 as of December 31, 2021, 2020 and 2019, respectively. The Association will continue to evaluate the

The tax years that remain open for federal and major state income tax jurisdictions are 2017 and forward.

Note 13— Leases Lessee The Association leases certain assets, consisting primarily of real estate, transportation and office equipment, under standard industry terms. The contracts are assessed at inception to determine whether a contract is, or contains, a lease. The components of lease costs were as follows: Year Ended December 31, 2020 $ 717

2021 Operating lease cost Variable lease cost (costs excluded from lease payments) Sublease income Lease costs

377

110 – 487

– – 717

2019 $

406

– – 406

Other information related to leases was as follows: Year Ended December 31, 2020

2021 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases Right-of-use assets obtained in exchange for lease obligations: Operating leases

2019

395

424

412

4,289

787

Lease term and discount rate for the periods ended were as follows: 2021 Weighted average remaining lease term in years: Operating leases Weighted average discount rate: Operating leases

14.00 3.09%

56 2021 Annual Report

December 31, 2020

15.00 3.09%

2019

1.03 3.75%

Farm Credit of Central Florida, ACA Maturities of lease liabilities as of period end were as follows: Operating Leases December 31, 2021 $ 404 412 421 430 441 4,502 6,610 1,301 $ 5,309

2022 2023 2024 2025 2026 Thereafter Total lease payments Less: imputed interest Total lease liabilities

Note 14 — Additional Financial Information Quarterly Financial Information (Unaudited) 2021 Total Fourth Third Second First $ 3,866 $ 3,908 $ 4,064 $ 4,518 $ 16,356 Net interest income (340) (50) 85 (160) (215) Provision for (reversal of allowance for) loan losses 4,462 7,070 (1,528) (115) (965) Noninterest income (expense), net $ 3,116 $ 3,953 $ 2,451 $ 11,638 $ 21,158 Net income

2020 Fourth Third Second First $ 3,805 $ 3,813 $ 3,849 $ 3,865 Net interest income – 90 124 – Provision for (reversal of allowance for) loan losses 4,278 (1,825) (76) (1,398) Noninterest income (expense), net $ 2,407 $ 3,613 $ 1,934 $ 8,143 Net income

Second First $ 3,480 $ 3,956 $ Net interest income (440) (314) Provision for (reversal of allowance for) loan losses (1,241) (1,304) Noninterest income (expense), net $ 2,490 $ 3,155 $ Net income

2019 Fourth Third 3,501 $ 3,800 680 (350) 1,267 (1,600) 2,251 $ 4,387

Total $ 15,332 214 979 $ 16,097

Total $ 14,737 (424) (2,878) $ 12,283

Note 15 — Subsequent Events The Association determined that there were no subsequent events requiring disclosure through March 10, 2022, which was the date the financial statements were issued.

57 2021 Annual Report

~~ FARM CREDIT ~,

OF CENTRAL FLORIDA

204 East Orange Street Suite 200 Lakeland, FL 33801

PRSRT STD U.S. POSTAGE

PAID

COLUMBIA SC PERMIT 1160

7559

Farm Credit of Central FLorida Annual Report 2021

Articles inside

Management’s Discussion & Analysis of Financial Condition & Results of Operations

Disclosure Required by FCA Regulations

Report of the Audit Committee